Do you really want to work until you die? I sure don’t. No matter how old you are, it’s never too late to at least get something going! You may need to be a bit more aggressive with your contributions if your 20s are a distant memory, but you have to start somewhere.
There is something to be said about having a financial planner. They do earn money from your money, but as long as you don’t see the money leaving your account, consider it the cost of doing business. You should NOT have to pay a planner for a consultation. If they want money to see you, find someone else. A planner will help hold you accountable, and do all that math you hate doing. They can set up savings goals, open retirement accounts for you on your behalf, and realistically help you plan for your future. It takes the burden off you to find retirement vehicles on your own. Some good things to keep in mind:
- Contribute as much as you can to your 401K or retirement plan offered by your employer.
- Open a traditional IRA. You can contribute $5,500 per year to it. This is a “pre-tax” account, and you may be able to deduct contributions from your taxable income depending on your income and whether you can participate in a retirement plan at work (contributions need to be made via payroll deduction). This means you can reduce your taxable income! Less money for “the man” and more money for you. Your contributions grow and compound on a tax-deferred basis, so you won’t have to pay capital gains and taxes every year. Once you withdraw the money, however, it will most likely be taxed and treated as “income”, which is reasonable, since you didn’t pay any taxes on it in the first place. “The man” still wants your money one way or another.
- Don’t have IRA options at work? Open a Roth IRA. You can contribute $5,500 per year to it, but if you have BOTH a Roth IRA and traditional IRA, you can still only contribute $5,500 combined. The money is “after tax” money, so you won’t get any deductions on your taxes – but the savings will add up!
- Consider an annuity. There are lots of options out there, and one could be right for you. This kind of works as a paycheck once you reach 59 1/2. I highly recommend asking a financial planner about this! But don’t do it on your own if you’re not SURE what you’re doing.
- Do you have kids? You may want to ask your financial planner about a 529 Plan. Don’t do this one on your own, either, if you’re not SURE what you’re doing. Your planner can assist you with determining if this option could benefit you – along with the pros and cons (what if your child decides not to go to college?)
- Do you work for yourself? Ask your financial planner about other IRA options. They exist, and they can help you figure out which one could be good for you.
- Shaking in your shoes about rising healthcare costs, and your high deductible? Ask your planner about a Health Savings Account (HSA). Maybe you qualify! It never hurts to ask.
Be sure to have access to your accounts so you can check balances and track your progress. It’s good to be aware of what you have and know your options.
– Ready to Retire at 25…