How To Start a Retirement Fund

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If you have a job, and your employer offers a retirement plan as part of your benefit package, that should be the first place you start.  Employers often match what an employee contributes to the company plan.  That match acts like a guaranteed return on your investment – sometimes even doubling it!  Whatever your employer will match up to, whether it is 2%, 6% or 10%, try to contribute enough to your company plan to take full advantage of the match.  If you don’t you’re turning down free money.

If you don’t have access to a company retirement plan, the next best place to start is usually an Individual Retirement Account or IRA.  Almost anyone with some earned income can contribute to an IRA.  There are some limitations on how much you may be able to deduct from your taxable income, but those limitations usually won’t affect you unless your income is fairly high. 

It’s not hard to open an IRA.  Almost any bank or investment firm will help you open one.  You will need to decide whether to choose a Traditional IRA or a Roth IRA.  A Traditional IRA can provide you with an immediate tax break.  The Roth IRA will provide you will a tax break when you are withdrawing from the account during retirement.  You will want to research which choice is best for you.

Both the Roth and the Traditional IRA have limits on how much you can contribute each year.  You will be allowed to contribute a little extra if you are 50 or over.  However, if you haven’t already started building your retirement plan and you are nearing your retirement, you may want to research using more than one type of account.  As long as you don’t go over the annual contribution and income limits, you can contribute to different types of accounts, such as a Roth IRA and your company retirement plan. 

If you own your own business, no matter how small, you can increase your options for retirement plans.  There are a wide variety of plans available for small business owners.  Many are fairly low cost.  Most will allow you to contribute more on an annual basis than you can to an IRA.  Some will allow you to contribute quite a bit to your retirement plan.  If you have plenty of money that you’d like to put away, you should take a look at the available options.

If you can start saving on a regular monthly basis when you’re young, ideally before you’ve graduated high school, then you can have a surprising amount of money saved up by retirement.  I’m not talking about putting hundreds away each month, start with $25.00.  Increase it a little at a time when you can.  If you wait until you’re 40, you have to regularly put away more than 4 times as much to have the same amount when you retire.  Time is really on your side if you start when you’re young.  Don’t waste the opportunity. 

Regardless of your age now, it’s still never too late to start.  Get into the habit of contributing as much as you are able to on a monthly basis.  Soon it will be habit and your retirement self will thank you!


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