Retirement is a word a lot of working Americans long to hear. It means you’re able to transition from the working world to the non-working world and finally put your feet up. Unfortunately, we are now living in a time when very few people are able to actually retire comfortably. Decades ago, it was almost a given that people would retire at the ripe age of about 60 and enjoy the golden years of their lives. However, you’ll notice that more and more seniors nowadays are working well beyond the age of retirement. In order for retirement to work for you, you need to plan well in advance to it actually happening. You can’t start saving for retirement when you’re 50 in the hopes that you’ll be out of work in 10 years and have enough cash flow. The more time you give yourself to plan the retirement, the more money you’ll have to fall back on.
Why You Need to Plan Ahead for Retirement
Planning your retirement is essential if you don’t want to have to spend the rest of your life working. Right now, when you’re young, it can be easy to go to and from work without much care. However, when you get older, it’s more difficult to hold down a stable full-time job without it literally exhausting you. There have been studies that have even shown that older working Americans get sick more often than retirees.
Another reason to carefully plan for your retirement is because Social Security may not be enough. Depending on the job you have and what you’ve earned over a lifetime, you may only come away with a few hundred dollars a month in Social Security benefits. Even if you come away with $1,000 a month in benefits, this isn’t often enough for someone to live on comfortably. You need to have another type of account that can be used during your retirement.
Savings Accounts
As soon as you can, it’s important to start putting money into a savings account. Sure, savings accounts are great for those unexpected emergencies that pop up from time to time, but they can also be crucial for the retiring senior. If you have tens of thousands of dollars in your savings account, this is a large amount of money to utilize when you’re no longer working. As a side note, it’s important that you budget your money appropriately so that you don’t overspend within the first few years of retirement and then have nothing left.
IRAs
IRAs are self-directed into a fund that is then matched by the company providing it. You can withdraw on the IRA itself once you reach the age of retirement, but you can open an account at virtually any time. You can also connect the IRA with your income so that you don’t have to set money aside for it each month. If you’d like to know more about IRAs, you can read more here.
401K Plans
Most employers offer 401K plans to their workers. These plans are specific for retirement and are matched by your employer. What you put into the fund, your boss will put in the same amount. If you work at a specific job for a long time, you can grow a pretty substantial 401K fund. You can also withdraw on the fund at any time if you need extra money, but you’ll have to pay tax on what you take out. The only time you won’t be subject to tax is when you withdraw on the 401k plan once you reach retirement age.