It makes sense to talk this week about retirement in general with all of this talk about saving going on. Even if your find the exact job for you and you are so happy doing it, don’t you think down the road you will want to stop, wake up when you want, see the world, spend more time with family and friends? or would you rather work until the day you die? Most people would say they would like to retire one day. And I agree, and the sooner the better…. Assuming you can afford it.
Your future self will thank you for saving some of your hard earned money. Trust me, you hear all of the time about people that retire at the young age of 40something. There people saved up tons of money in a short period of time, or they invested it and pull off just some money to pay their bills or live off dividends, or interest. Wouldn’t you love to be them? No more 8 to 5 grind, financial freedom?
The simplest way to do that is to invest and save, and most importantly when you invest and save, never put all of your eggs in one basket more on that later.
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Ha, you are still reading this blog after I made that horrible roth Star Wars joke? Impressive. well the second part of this IRA savings special is about Traditional IRA. These retirement accounts are often tax deductible. Traditional IRAs take advantage of the tax benefit immediately. The internet is a great location where you can calculate your IRA’s balance at retirement.
I strongly suggest you play around with both of the Java Calculators (see last week’s post) and determine which version of retirement account is better for you. The main purpose of personal finance is to plan for the future so this decision should not be taken lightly. But what I found is that the younger you are when you start your IRA the better Roth looks (other variables the same). for me the difference was over $100,000. The older you are when you start the better a traditional IRA is. It is important to always try to make max yearly contributions (around $4k, or $333 a month), in the grand schemes of things this is not that large of a price for a more comfortable life after retirement and peace of mind.
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To continue the topic of saving the next logical step would be to talk about IRA’s (Individual Retirement Account). Retirement is very important, it is what people strive to achieve, and you want to make sure you have enough money when you do retire so that you do not go into debt, forced back to work or even worse forced to work longer and longer because you can not retire.
So what is a Roth IRA? Does it have anything to do with Star War’s planet Hoth? A Roth IRA is a savings account where you contribute money (around $4000 depends on your age) into a Roth account where the managers then invest the money into securities (Stock and Mutual Funds). Roth IRA’s are NOT tax deductible, and the transactions within the account are tax except. A great online tool to calculate the amount in the account at retirement is here.
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