I'm too young to think about
retirement. I'm too old to save for retirement, so I'll just wait for my
Social Security check.
FACT: It is never too early or
too late to plan for your future, especially for retirement. Below are
different retirement savings accounts that can help you start saving for your
Plans Employer-sponsored plans allow you to contribute a certain
percentage of your paycheck without paying taxes. Some employers match
your contributions up to a certain amount when you have worked at the company
for a specified number of years. Common employer-sponsored plans
A 401(k) plan
[offered by a corporation]
A 403(b) plan
[offered by educational institutions, churches, public hospitals, and
A 401(a) and 457 plans
[offered by state and local governments and certain tax-exempt
Employer-sponsored plans are intended to be a long-term investment.
There are penalties if you decide to take money out of the account before the
"retirement age." Talk to your employer for more information, including
the terms and conditions of the retirement plan. Each employer offers
different plans for its employees.
Individual Retirement Accounts
(IRAs) A traditional IRA allows you to save money without paying
taxes until you withdraw it. The money you put into the IRA can lower
your taxable income and grows tax-free while it's in the IRA account.
Some different types of IRAs include:
A Simplified Employee Pension
Individual Retirement Account (SEP-IRA) is a variation of the IRA for
the self-employed. SEP accounts are treated as IRAs and funds can be
invested the same way as any other IRA.
The Individual or Solo
401(k) is for businesses in which the owner is the only employee;
this IRA has a higher contribution limit than the SEP-IRA. Roth IRAs
have a lower maximum contribution limit than the SEP-IRA and the Individual
401(k), but allow your money to grow tax-free, plus you can withdraw your
money without paying federal taxes.
IRAs can be set up at a bank, credit union, or other financial
IRAs offer different investment options. You can
choose from individual stocks, mutual funds, bonds, or money market funds,
depending on how much risk you want to take. In general, the closer you
are to your retirement age, the less risk you should take.
What are stocks, mutual funds,
bonds and money market funds? Learn
about these investment basics that can
help grow your retirement savings.