- Saving for retirement
can be difficult with the many tax laws and rising
broker fees of today. It may be hard to find a savings
account where you can store away a portion of your
hard-earned salary for the golden years. The good news
is that the government has invented a way for you to
stop depending on social security, without the worries
of taxes or audits. These new accounts are called
Individual Retirement Accounts or IRAs.
IRAs offer many advantages in regards to taxes and
investments that allow you to earn more money than an
ordinary savings account. Taxes on IRAs aren’t charged
until you withdraw the money from the bank after you’ve
retired, which allows you to earn interest on the base
money you put in from your salary and then earn interest
on that interest. Additionally, the amount you are taxed
depends on how much you withdraw, not on how much is in
the account, meaning that you’ll probably be charged in
a lower tax bracket that you’re in now, even if you’ve
saved up a lot. IRAs also can be set to automatically
contribute to a mutual fund, meaning that you don’t have
to constantly monitor them to see if your money is
really working.
The sooner you open an IRA and the more you put into it,
the more interest and compound interest will build up
and the more money will be there when you finally do
need to withdraw it. You can set up IRAs as soon as you
begin working as an adult at the age of 18, and
contribute up to $3,000 per year, provided that you earn
that much. After the age of 50, you can kick in another
$500 a year, as “catch-up”, and keep saving until you
are 70, at which point you must begin to withdraw. That
means you could have over $100,000 saved up by the time
you start taking government payments without social
security.
Talk to your bank or financial adviser about setting up
an IRA today. As you work toward retirement, you may not
want to rely on the tenuous social security system and
may enjoy living off of compound interest that isn’t
taxed until you begin spending it. Ask if you’re in the
right place to start saving your money and taking
control of your retirement.
