How To Begin a Retirement Fund

I assume that you want to be very wealthy and want to live a comfortable life during retirement; almost everyone does.  However, a shockingly small number of people actually start a retirement fund to prepare for this phase of life.

As our lives grow longer it becomes more important than ever to prepare for retirement as early as possible.  Considering that most people want to retire at 65 and will live well past 80, that is a large financial gap to fill.

There are several options to start a retirement fund.  The most common options are Individual Retirement Accounts (IRAs) and work related accounts such as 401(k), 403(b), and 457 plans.

In order to start your retirement fund you must know that IRAs can only be registered in one person's name.  There are no joint IRAs.  Next, you can contribute up to $5,000 per year per person into an IRA in 2009.  If you are over 50, you can bump that up to $6,000.

If you are lucky enough to have an employer that matches retirement funds invested, then you are in luck - that is basically free money! Contribute up to the amount that the employer matches and then put the rest of the money that you want to invest into an IRA.

However, with IRAs there are penalties if you withdraw money from your retirement fund before age 59.5.  There are some exceptions to this rule, but they are complex.  So, if you think that you may need some of this money before retirement then don't put it all into your retirement fund.  Put part of it into a regular investment.  This will keep you from paying penalties that are required if you withdraw from your IRA early.

Another important area to consider is diversification and allocation of your retirement funds.  It is important to research your investment choices with employer options and with IRAs too.  You will be much more satisfied if your retirement fund is properly aligned with your risk tolerance level.  A professional financial services advisor can assist with this determination.

There are a lot of complexities involved in starting a retirement fund for yourself, but don't let that discourage you from investing.  The most magical thing in the world is the power of compounding interest.  If you start a retirement fund early and fund it regularly then the sky is the limit.

Remember, it is never too late to invest in your retirement - and there is no amount that is too small to invest.  Every little bit helps and will make your retirement that much more enjoyable.