If you are a new graduate, you should start saving now for retirement. Life never stops; one day you are celebrating a special achievement, and the next you are facing yet another life milestone. Congratulations on becoming a college graduate! Have you thought about retirement?
If you were to ask this question of many recent college grads, they would probably all look at you and roll their eyes. After all, retirement is many years away, right? If you are in your twenties, you still have about 38-42 years before you reach retirement age, but you should not forget about your financial future. After all, the earlier you start saving for retirement, the better.
When I first graduated from college, I was extremely broke with student loans hanging over my head. When I was able to get that important first job, the last thing I wanted to think about was paying myself for retirement at age 65. However, you should get yourself into the mindset of saving anytime you have an income. Just get into the habit of putting aside a little bit of money for retirement. You will thank yourself later on in life and you’ll be working hard toward your own personal financial goals. It’s very simple; the more you save now, the more you’ll have to live on later. And if you start in your twenties, with compound interest, you’ll have way more money than if you wait to start saving in your thirties.
You can decide to simply open a savings account locally or start up a 401(k) or an IRA. Start with what you understand, just as long as you are saving some money back. There are advantages and disadvantages to each, but remember,they are all ways of retirement savings.
Avoid Costly Mistakes:
There are no cut-and-dried answers to your personal financial questions. Make sure to do your research, and make a budget and keep it. Use your credit in a wise manner and build a better financial future for yourself. Use these free tax tips in order to make the most of your retirement savings now.
When two things are present and you have to pick one, you should compare first the two before making a decision. Because that IRA has two forms which are the traditional IRA and the Roth IRA, it is then valuable to compare these two so that you can determine which of them is the best for you.
In order to distinguish one from the other, we will compare the Roth IRA and the traditional IRA with regards to their rules ad regulations.
Traditional IRA Rules and Roth IRA Rules
Of course, there are qualifications before an individual person can be eligible to set up an IRA account. And obviously, he or she must be an income earner. IRA is a retirement plan that is offered to benefit income earners. There is no point of opening an account in the IRA when you have nothing to deposit into it out of the income that you receive.
The traditional IRA has an age limit for eligibility. All individuals who are already 79 ½ years and beyond can no longer set up a traditional IRA account. The Roth IRA has no age limits.
Contribution Limits 2011
For both the traditional IRA and the Roth IRA, the contribution limits for 2011 are $5,000 and $6,000. The maximum amount of $5,000 is set for IRA contributors who are at the age of 49 and downwards. On the other hand, the $6,000 amount is the limit of contributors who are at the age of 50 and upwards.
The Roth IRA distribution rules are apart from the traditional IRA distribution rules. According to the Roth IRA rule, withdrawals of funds can be made by the contributor any moment of time but after the five-year taxable period has expired. The period begins during the year in which the first contribution is made.
Under the traditional IRA, withdrawals should be made when the contributor is 79 ½ years old. This is a compulsory withdrawal. But withdrawals can be made as an option of the contributor when he or she is 59 ½ years old and upwards until 79.
If you’re considering the type of investment you should put your retirement money into look no further. In this article I’m going to show you three reasons why the Roth IRA is the best fit for this option.
First off a Roth IRA has the ability to let you pull money or take a distribution tax free after age 59 and a half without enduring a penalty. This means whatever you have in your account is not going to be taxed. However with a traditional individual retirement account you have to pay taxes on ever dime you pull out of the account no matter what.
Second, when you consider the Roth IRA Qualifications it also has another great benefit. It also allows you to grow your money tax free as well. This means that if you see big returns in your account one year you won’t have to pay a dime in capital gains or ordinary income tax. Unlike a traditional IRA you will have to pay taxes on every single dollar you pull from the account no matter what kind of growth you get on your account.
Third and finally, a Roth IRA also allows you to pay the taxes on your retirement income up front. The reason this is better than withholding your taxes is because in your younger years as your saving you won’t usually be earning as much, and you’ll have the added benefit of other tax deductions like your children, and home interest payments which will lower your tax liability.
In the end these reasons can give you much better options to having a better retirement. However you must also know that you have to abide by the Roth IRA Withdrawal and Qualification rules in order to set up an account like this. So get started today and contact your local financial professional.