So you are in your twenties or thirties. Retirement seems like a long ways off. There is plenty of time to save and invest… right? Although retirement may be quite a few years away, what you do now to prepare for it will have a huge impact on your quality of living when you do retire. A dollar saved today can be worth ten dollars years from now!
Saving for retirement is very important. The earlier you start, the longer amount of time you give your money the opportunity to compound and grow. Unfortunately, one cannot expect to put their money in a traditional savings account and call it a retirement plan. Where you keep your retirement savings matters. Savings accounts, money markets, and CDs are all great places to keep money in the short term, however none of those accounts has historically kept up with inflation in the long run! That means your savings will be worth less when you retire!
Here are some tips to help you get started with retirement planning.
- Get Financial Advice – As a young person, we suggest finding a financial advisor who can help you develop a plan towards saving for your retirement. Consulting with a financial professional is the best way to develop a strategy based on your specific needs and goals. Debby is our recommended financial representative. She has worked with many of our members and can provide specific insight for law enforcement employees and their families. You can learn more about her on our website.
- Get an IRA – IRAs will help you earn more money through growth and dividends. There are two types of Individual Retirement Accounts (IRAs). There is a Traditional IRA and a Roth IRA. They are both tax advantaged accounts but in different ways. In a Traditional IRA, contributions are tax deductible and earnings are tax deferred (meaning you pay tax when you withdraw it during retirement.) This type of account makes sense if you expect to be in a lower tax bracket during retirement. In a Roth IRA, contributions are not tax deductible, but when you withdraw during retirement they are exempt from tax. To learn more about the differences between a Traditional and a Roth IRA, please visit our website and/or speak with an account representative.
- Get a 401k – Most departments and companies have a 401k program that will help you save and grow your money for retirement. Sometimes they will even match your contributions! Typically with a 401k, contributions are automatically deducted before tax from your paycheck. This is a great way to save money and lower your tax burden.
- Invest – Investing in the market can produce long term growth. You could invest in individual stocks, exchange traded funds (ETFs), bonds, or mutual funds. How you invest your money is dependent on your risk tolerance and strategy. It is extremely helpful to speak with a professional before investing in the markets.
There are many other ways to get started with your retirement savings. These are just a few helpful tips. We are happy to help you to the best of our abilities but speaking with a financial advisor like Debby is invaluable.