Planning for retirement is a necessity. It is going to happen, like it or not. You are getting older and that in itself is a reason to begin thinking about the process of saving for retirement if you haven’t. Most employers offer a 401(k) or retirement program. Depending on the company, they may even match up to a particular amount or percentage. If you are currently employed you should look into that plan to see if it is something you want to invest in.
At all 3 of my previous employers I had a 401(k) program, as well as matching up to a particular amount. This was extremely helpful.
For those of you who are self-employed or who have left your previous employers and no longer have a retirement program to invest in, you want to consider taking out a Roth IRA or a Rollover IRA. Before investing in an IRA though, you do need to do some research and speak with a qualified financial planner or advisor who can help you understand the tax benefits and whether or not you qualify for that particular program. Tax laws and qualifications vary depending on income, state and what type of account you decide to invest your money in. Not only that, but you also want to make sure you will be earning a significant rate of return on your investment. An IRA at a credit union or bank is going to make significantly less than if you invest through Fidelity or another larger investment firm.
When should you start investing in retirement? Honestly? Right away. The moment you have the ability to start saving for retirement you should. But is that realistic? When you’re in your early 20’s are you going to take the time to do so? Probably not. Dave Ramsey suggests that you begin saving for retirement as soon as you’ve got 3-6 months worth of expenses saved for your emergency fund. I’m going to counter that however because the fact is retirement is going to be more expensive than you currently can imagine. In fact, most people haven’t adequately saved for retirement. And social security isn’t going to help you much in that area either.
So here’s the thought – you should be saving 15% of your pre-tax income toward retirement. You should start saving as soon as you have the opportunity. You should make sure your retirement accounts are diversified and you should make sure that you are speaking with a financial planner who can tell you the how’s and why’s of your retirement plan.