Although retirement may be many years away, it is never too early to start planning. It can be fun to think about all the things that you will do with your free time but to be able to have the freedom to do what you would like, you need to do the hard work of planning the logistics of how you will be able to fund all of these plans.
To begin saving for your retirement, it is a good idea to open a retirement account. Your employer may offer you the chance to have an employer-sponsored savings plan such as a 401(k). If you don’t get offered an employer-sponsored savings plan, you are self-employed, or you want to supplement your current savings plan, you may decide to open an individual retirement account (IRA). Depending on the type of IRA that you choose, it will allow you to take advantage of either tax-free growth or tax deferral.
There are two main types of IRAs that you can choose from; Roth IRAs and traditional IRAs. When it comes to selecting the type of IRA that is best for you, you need to consider how much you aim to contribute a year, taxes, age limits, income limits and any penalties that you might incur.
To help illustrate more simply the difference between Roth and traditional IRAs, take a look at the following infographic. It will help you to clearly see the differences and help you to decide which one is right for you.
Infographic Design By Accuplan Benefits Services
No matter what your age, it is never too late to start saving for retirement. What are some methods you have used to save for your twilight years? Let us know in the comments below!