Putting away money towards a retirement savings account should become a priority from the moment a young adult lands that first job. While many workers wait just a few years prior to age 65 before thinking about saving for retirement, smart consumers will begin seeking sources of funding well before the golden years. Decades ago, retirees could count on Social Security income and a passbook account to help make ends meet once they got a gold watch. But the twenty-first century senior faces more formidable challenges. Retirees often envision a life of fun in the sun, but because older adults are living longer more productive lives, long-term healthcare is a major concern and that can cost plenty! 24-hour assisted living, even in a moderately priced facility, can run several thousand dollars per month. Housing is also a major expense for those who must rely on continued personal care or reside independently with occasional assistance. With insurance, nursing care can be affordable; but as health needs fluctuate, so will the cost.
After working for an average of twenty-five to thirty years, older adults don't want to have to get a job at a fast food restaurant or bag groceries to pay the bills. Workers who fail to plan for later years will be forced to rely on meager Social Security benefits, which usually don't provide am adequate income by today's standard of living. With proper planning, they can stay off the welfare rolls and remain financially independent for many years. But, the key is to begin early enough in one's working career to accumulate enough cash over a long period of time, hopefully with interest! If younger employees don't open a retirement savings account early enough in their career, chances are that there won't be enough time to accumulate enough money to live comfortably. Youth is not only a time to ponder retirement, but also to seek after God. "Remember now thy Creator in the days of thy youth, while the evil days come not, nor the years draw nigh, when thou shalt say, I have no pleasure in them; While the sun, or the light, or the moon, or the stars, be not darkened, nor the clouds return after the rain" (Ecclesiastes 12:1-2).
An employer-provided retirement savings account is a good place to start planning for a better post-employment lifestyle. Most employers offer programs which match payroll deductions for future retirement. An employer-matching fund ensures that workers can leave the job with a nice nest egg to last a second lifetime. Young workers may also want to invest in a tax-deferred Individual Retirement Account (IRA), which shelters as much as $2,000 to $5,000 in deposits each year. IRA depositors pay no taxes until the age of 59 1/2 when monies can be withdrawn without penalty. Employees also invest part of their salaries in a tax-deferred 401(k) with employer-matched funds for greater savings. The beauty in investing in a 401k is that accumulated monies can be rolled over into another employer-provided retirement savings account when workers leave one job and go to another; and depositors don't pay tax until withdrawal. Other investment vehicles, such as mutual funds, stocks and bonds, money markets, or Certificates of Deposits that pay high-yield long-term returns can also be part of an older adult's retirement savings account.
The most important first step in saving is to consult with a financial planner who can help suggest the easiest, fastest and safest way to accumulate funds. Bank buyouts, housing market slumps, and a lagging economy can make selecting the right vehicle for savings a serious issue. A regular passbook retirement savings account is simply not going to yield enough funds for seniors seeking a life of luxury. IRA and 401(k) accounts are relatively pain-free when it comes to saving enough money for a rainy day or a sunny retirement. Because plans are company-sponsored with employee payroll deductions matched with employer funds, monies accumulate easily. Corporations invest employee deposits into mutual funds and other investment instruments to earn added returns, which are shared by employers. An accounting of annual earnings keeps workers apprised of dividends earned. Annual contribution limits max out around $15,000; but that's a nice piece of change for workers who begin saving when they are in their mid 20s and 30s. Employer-provided retirement accounts also provide a hedge against inflation. In the event of chronic illness or disability, workers can tap into a 401(k) retirement savings account as a source of emergency cash. Like IRAs, there is a 10% penalty for early withdrawal, but paying the penalty may be less expensive than borrowing emergency funds at a higher interest rate through prime, sub-prime or hard money lenders. Other variations on the basic 401(k) are 401(k) rollovers to IRAs or Roth IRAs, and the Safe Harbor 401(k).
An astute financial planner can suggest ways to begin and make regular deposits into a retirement savings account that will enable employees to realize a carefree lifestyle. Company plan administrators may also assist workers in choosing the right investment vehicle for the highest yields. Besides employer-matched money, workers can also purchase stocks, bonds and mutual funds independent of the workplace and hold onto these instruments for even greater returns. The disadvantage to other savings options, however, is that they are not tax-deferred and the more the dividends, the greater the tax burden. Older adults may also consider investing in precious metals or other high-yield commodities, such as silver and platinum, or investigating reverse mortgages, loans based on home equity. Any long-term investment may be a little risky in light of uncertainties in the global financial markets, but a stock analyst or investment banker may give the best tips on how to win in a sluggish economy.
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