Your financial advisor would love to see you starting to make contributions into a pension fund as soon as possible, but more often than not this does not happen: being young often means many other financial responsibilities such as paying off a student loan or plans to have a bigger family.
Depositing savings for retirement should become a habit from the very first job, for every year of savings will make a big difference in how much money will be available for a retirement. On the average, a person who is able to save at least 70% of their present income every year will be able to maintain the same lifestyle after retiring.
A part of your retirement earnings will be Social Security Benefits that will pay about 40% of earnings that were produced before retirement. One cannot count solely on Social Security Earnings, especially being older, when the risk of getting sick is higher, so whether you are running your own business or you are employed, start saving for your retirement as early as you can.
If you are employed you can request an individual benefit statement from your employer. Also, find out if you are able to benefit from your spouse’s retirement plan, learn what will happen to the 401K from your job in case of job loss. If you do not have a 401 K plan, enroll in one through your employer and start contributing to it as early and as much as you can. Contributions to 401K are beneficial to you in many ways.
If you do not have a 401K you should contribute into an individual retirement account, or an IRA. 401 K seems to have some advantages compared to IRAs. Both funds are regulated by government on the amounts of pretax dollars; 401K though, has a higher allowed maximum contribution amount a year. Another advantage is that many employers do contribute to their employees 410K, matching their amounts. IRA’s too, have their own advantages: you can contribute to IRA at any time while having a 401k is tied to your employer, meaning when you leave your job, you lose your ability to contribute to your 401K.
You have a choice of putting your money in IRA or Roth IRA accounts, which will allow you to save money for your retirement, make them grow, and to have tax benefits. If you invest in IRA, you will not have to pay taxes on the amounts of money you contribute. Roth IRA and Roth IRA can make your money grow over time. You can be flexible with your IRA funds: you can invest them into stocks, mutual funds, and CDs.
If you feel overwhelmed or have many complex questions about starting your retirement plan, you can receive a good advice on starting one if you contact an Independent Financial Advisor in your local area that may be able to give you a free consultation.