Retirement planning plays a significant role in an individual’s ability to live comfortably during their later years. Unfortunately, more than 60% of people in the United States do not have nearly enough money saved for retirement. Planning and saving early for retirement reduces the chance that an individual will not have enough money saved. Several situations can contribute to a lack of retirement resources. The Internal Revenue Service establishes rules on the contributions people can make depending on a number of factors. Despite this, people can use a range of strategies to accumulate enough wealth for retirement and the selected strategy depends on an individual’s age group.
People just entering the workforce can benefit greatly from saving in their early to mid-20s. Contributions in this age group increase substantially over time. Once an individual reaches their 30s, he should begin seriously planning his retirement. Planning in this age group is critical because the ability to gain on investments begins to dwindle. People in their 40s should consider a more aggressive savings practice because with roughly 20 years before retirement, the opportunity for investments to grow has decreased substantially. In addition, readjusting, or starting with, a mixed investment strategy will level off the overly aggressive approach that might allow money to grow steadily. Individuals in their 50s might experience financial pressure while caring for aging parents or putting children through college. Consequently, an aggressive approach to retirement savings might be required.
The 401(k) plan offers people interested in retirement planning an option for saving money. The Internal Revenue Service limits the amount of money an individual can contribute and the limitations vary depending on several factors. Generally, employers deduct the amount an employee specifies each pay period in a tax-deferred manner. Contributors do not pay taxes on payroll deductions; they are paid when someone withdraws money from the account.
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Author: Ben Michaels