Building retirement assets now matters later

Planning for retirement is a must, not a maybe or “I’ll do it later” thing. If you’re a working adult, you should start taking advantage now of how time can help build up your retirement nest egg.

There are various ways you can put money aside for retirement and lots of resources to help you do it. Here are some of the more popular ways you can start saving for tomorrow.

401(k)

This type of retirement account is often managed by employers, some of whom may even offer a match for participating employees as an incentive for them to save. If available, take advantage of your employer’s matching contributions. It is essentially free money toward your retirement. Once the account is setup, it is wise to focus on the long-term growth of your 401(k) account and not to fret too much over day-to-day changes in the stock market. Contributions to standard 401(k) plans are limited to $18,000 for the 2016 tax year.

IRAs

There are several types of Individual Retirement Accounts. The two most common ones are the Traditional and Roth IRAs. The Traditional IRA is similar to the 401(k). It’s for earned income and grows tax-deferred until you’re able to make withdrawals at age 70-1/2.

Traditional IRAs

Traditional IRAs were designed to allow individuals to save for their retirement while giving them a tax break now. The idea is to give people the opportunity to relieve some tax liability during their working years and defer it until retirement when they are generally in a lower tax bracket. Contributions are generally tax-deductible depending on your income levels and tax filing status.

What is a Roth IRA?

Roth IRAs were created through the Taxpayer Relief Act of 1997 to help low and middle income people save for retirement. Contributions made to the Roth IRA are not tax deductible at the time you contribute your funds to the account but those funds are from post-tax income. This means that your Roth IRA distributions are generally tax-free when they are taken years later for a qualified reason. Contributions can be made to a Roth IRA, regardless of age, based on the eligibility limits determined by the IRS each year.

For more information on Roth IRAs, visit the IRS website.

Our knowledgeable Financial Consultants at Travis Financial Services can help you with retirement and investment planning. Schedule a free appointment at one of our Travis Credit Union branches, please call (800) 877-8328 during normal business hours.

IRS website TFS Financial Consultants

 


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