Jump-start to Retirement Prep
Retirement. It may not even be on your radar, especially if you’re several years out from retirement age. But starting to prepare for retirement now can make a huge difference 35 or 40 years down the road.
Primary Sources of Retirement Income
Today, most people rely on two primary types of retirement income.
Other Sources
Though less common, pensions and Individual Retirement Accounts (IRAs) are additional sources of retirement income for some people. Only About 12% of private sector workforce employees have a pension plan, which is a defined retirement benefit where a company sets aside additional money that is paid out as monthly income for life, based on years of service to the company; after a period of time the employee becomes “vested” and 100% of that money is theirs. However, many companies have phased out pension plans opting for retirement plans such as a 401(k) or 403(b) instead.
And for people who are self-employed, or their employer doesn’t offer a qualified retirement plan, they can set aside money in an IRA, using pretax dollars or a Roth IRA, using after-tax dollars to invest in managed funds.
If you have a qualified retirement plan through your employer but reach your contribution limit, you may consider contributing extra money to an IRA.
TTo maximize the benefit of any of these long-term retirement income sources, you need to start early, stay the course and continue to increase your contribution amounts over time.
It’s important to remember that you are in control when it comes to retirement preparation. It’s up to you to determine how much to contribute to your account, how much to add to your contribution amount year after year and how your contributions are invested.
Hesitating Can Be Costly
How does compounding work? When you invest your money, you have a potential to earn more money, not only on your investment but also on any earnings from those investments. Compounding is the growth of these primary earnings and the earnings themselves.
However, compounding needs time to work. By contributing early in your career, the sooner and faster your accounts have the potential to grow.
Putting off participating in a retirement plan comes with a cost. Waiting can mean the difference in tens or even hundreds of thousands of missed dollars in your retirement account 35 or 40 years from now.
Once you learn these powerful concepts of starting early, compounding and the cost of waiting, it can change your retirement preparedness behavior.
Starting early makes a big difference. Hear what Pete the Planner has to share.
Preparing for Financial Emergencies
Retirement may not even be on your radar, especially if you’re several years out from retirement age.
The views and opinions expressed by Peter Dunn (aka Pete the Planner) are solely his and do not necessarily reflect the views and opinions of the companies of OneAmerica. Pete the Planner’s content is for overview and informational purposes only and is not intended as tax, legal, fiduciary, or investment advice. Pete the Planner is not an affiliate of any OneAmerica company.