Saving Money for Retirement: How and When to Start

Source: https://www.manilla.com/resources/money/saving-money-for-retirement/

Many people wonder when to start saving for retirement. The truth is, it’s never too soon to get your finances in order and start saving money for retirement, a time when the last thing you’ll want to be doing is worrying about money. The earlier you begin, the more you can save, and if you ask most baby boomers approaching retirement right now, they’ll probably tell you they wish they’d paid more attention to their retirement savings when they were younger. Unfortunately, many Americans are entering retirement without enough savings. The way to avoid this is to maximize the ways to save money for retirement.

Here are two savings vehicles that can help in saving money for retirement:

Your 401(k).
Maximize your employer-sponsored retirement account. Your contributions lower your taxable income and in some cases your employer will offer to match up to a percentage of your contribution, which is free money! Everyone should take advantage of the match and aim to contribute up to 10 percent of your annual salary. If you’re in your 40s and have yet to start saving money for retirement, you may want to save even more. If you’re over the age of 50, you can contribute an extra $5,500.

An IRA.
Similar to a 401(k), an individual retirement account (IRA) lets you invest in a number of stocks and mutual funds and earn certain tax benefits. Traditional IRAs let you deduct your annual contribution from your taxable income today and later pay income tax on the distributions in your retirement. A Roth IRA, meanwhile, doesn’t allow for tax-deductible contributions today, BUT you get the advantage of tax-free withdrawals in retirement. In addition to your 401(k) consider opening an IRA as supplemental savings.