With tax time here again most of us are looking forward to getting a check back from good old Uncle Sam. The question is what to do with our new found wealth? A new T.V., car, or maybe a long needed vacation? Maybe you should start thinking about investing in yourself. A retirement fund is not only an investment for your future, but it can give you peace of mind knowing you are covered for any of life’s curve balls as you grow older.
The average age that people are retiring has been rising in recent years. This is because of lack of funds. According to a U.S. News article on paying for retirement, the average Social Security benefit for retirees in 2012 was only $14,147 per year ($16,295 for men and $11,999 for women). This can make it difficult to pay bills let alone enjoy retirement. Check out this calculator from the Social Security Administration to estimate what you will receive in benefits. Was it enough to retire on? The article also states that only 30% of retirees received supplemental income in retirement from a pension or retirement account. With the lack of funding in retirement more and more people are being forced to forgo retirement. If this hits close to home, you are not alone.
I know what you are thinking: “It’s too late to start now, I wouldn’t be able to save anything by the time I retire.” or “I don’t have enough money to save for retirement right now.”. Let’s start with the first objection. It is never too late to start saving. The sooner you start, the more you will have come retirement. But even if you start later in life, if it is invested properly, it could give you a few thousand dollars a year more in retirement . It honestly could be the difference between getting to retire or not. The second objection is something we may not realize can be overcome with some planning. How much do you spend on coffee from gas stations or coffee chains a month? How many times do you eat out a month? Did you know that you can start a retirement fund for as little as $50 a month? You would only have to skip eating out 7 times a month at $7.00 per fast food meal, or brew your own coffee at home and skip spending the $2.50 for coffee at the chain store 20 times per month to reach this amount. There are several more ways we can save if we look at our discretionary spending. Small sacrifices now could have huge payoffs in the future.
“But what if I need that money for an emergency? I can’t afford to have my money tied up and not be able to use it.” This is another objection we hear all the time. Most people do not know there are many different types of retirement programs that are set up to solve different issues faced by the individuals. A fund that most of us have heard of is 401K’s, which have funds deposited that are pre-taxed (which means no tax is taken out of these funds and they do not count towards taxable income). The down side to this is that if you need money from this fund you have to pay a 10% penalty (there are exemptions for certain reasons) or you can get a loan (if the company allows it) but you must repay what is withdrawn with interest in a certain time frame. This is a great way to save if you do not intend to withdraw money before you retire (which you shouldn’t because it for retirement, right?). But what if you need access to the funds for emergencies but don’t want to pay penalties on what’s withdrawn or worry about paying it back. For these individuals a Roth IRA may be the best choice. With this fund you contribute post tax funds (which means you have already paid taxes on the funds) so you are able to withdraw any funds that you deposited without a penalty and you do not have to pay it back. The only catch to this fund is that you cannot withdraw any of the interest earned on the funds without having to pay a penalty on the interest. As with any retirement fund, you do not want to withdraw any funds if you can help it. The whole purpose of a retirement fund is to save for retirement. There are numerous other types of retirement funds available that are perfect for different scenarios. The best thing to do is talk to a financial planner and discuss which one would best fit your budget and financial situation.
The bottom line is there are numerous options for every situation. From the older saver to the budget conscious, there is a retirement fund that can help you ensure that one day you will be enjoying your golden years instead of watching others enjoy theirs. Contact us today to explore the many options available to you and start investing in YOU today!