Saving for retirement is one of the best things that you can do for your future. It allows you to build up a little nest egg of protections, making it easy to just relax and enjoy life in retirement, rather than having to scramble around and hope that you will have enough. Or even worse, you find out that the retirement savings never happened and you now have to continue, or go back to, work.
Many people assume that they have a lot of time to prepare for retirement. They think that their 40s is plenty of time to get started, but in reality, you are going to have a lot of groundwork to recover from if you wait all this time to get your retirement started or to really start putting money towards it. Starting just a few years earlier, or even in your 20s, can make a huge difference, regardless of how little you are able to contribute during those few years.
Not only does saving for your retirement help you to get ready for your golden years and allows you to take things easy, it also provides you with a way to save on your taxes this year. The IRS encourages individuals to save for their retirement by adding in a deduction for those who make contributions to their retirements. If you would like to learn a bit more about this deduction and how you can start saving on your retirement, make sure to contact your local tax professional right away.
Picking a Retirement Plan
One of the hardest parts about planning for retirement is figuring out which kind of retirement plan you would like to use. There are two available for most people known as the traditional IRA and the Roth IRA. Let’s take a look at both of them to help you choose the one that is right for you.
The traditional IRA is the option that most people will chose from. It is easy to use and often their employers will offer to match contributions to a certain point when you go with this option. In addition, when you make a contribution, you can write that amount off as a deduction when it comes time to do taxes at the end of the year. Many people like getting that deduction later in the year because it can save them a lot of money on their tax bill. Keep in mind that you will have to pay taxes on any contributions and earnings when you start to withdraw the money.
Another option that you can choose is the Roth IRA. This option allows you to make contributions on your own, but comes with the added benefit of saving you on taxes a little bit later on. You are not going to be able to deduct the contributions from your tax return in the year that you make them, but you will not be taxed on any earnings or withdrawals when you reach retirement. Considering your tax bracket will be a bit different by retirement and the taxes are most likely to be higher, this one can really save you money over the long term as long as you can wait a bit.
Each of these retirement plans have positives and negatives that you may want to explore. Your tax professional will be able to go over the options with you to find one that is going to work the best for your needs. Whether you are just starting out or looking for something new for the retirement plan, make sure to talk to your tax professional and find out the best method for your plans and to crunch some numbers to get the best results.
Starting Early
One of the best things that you can do for your retirement is get started early. Not only does this give you time to put in more payments, but it adds in a benefit of allowing you to earn even more during the years because of compound interest. The money you contribute to your retirement plan is not just sitting by idly waiting until the day you retire. As long as you pick a good retirement plan, you will be able to earn a lot of interest on this money and bring home more than you put in over time.
So the earlier you are able to start putting money into the account, the better off you are going to be. You will get the chance to save up money for more years as well as get that interest working for you for longer. This is why those who start saving in their 20s or 30s have a lot more money for retirement compared to those who don’t start until their 40s or later. Even if you are only able to put back a small amount in the beginning, it is much better than nothing and can help you get some good retirement money set up.
Preparing for your retirement as well as your tax return at the end of the year can take some financial planning. Make sure that you have the right tax professional on your side right from the start to save time and money. Contact our offices today to get started and find out how easy it can be to get that tax return done right.
Johnson, Johnson & Associates, Inc.