Decades ago, your mom and dad could retire comfortably and have a nice little nest egg to fall back on. These days, it’s difficult for the average American to retire without having to worry that they won’t have money for bills, food and other essentials. It’s common for people to focus more on the here-and-now as opposed to their long-term goals. You might be focused on paying off your mortgage, making rent each month and having enough cash for groceries each week and the last thing on your mind is saving up for retirement. Unfortunately, when you reach the ripe old age of 62 and retirement is on the horizon, you may not have enough to fall back on in order to live a financially sound life.
Why Planning for Retirement is Important
Planning for retirement is important because it comes a lot quicker than you might think. Before you know it, you’re in your 30s, 40s, 50s and then you’re facing the end of your working career. Without careful planning, there may never be an end to your full-time employment status and you’ll be working constantly for the rest of your life just to make ends meet. Many studies have even suggested that working seniors get sick more often than retirees who are able to take better care of their health and wellness.
How to Start Planning for Retirement
It is never too early to start planning for your retirement. You might laugh at the idea of opening a retirement fund when you’re only 20 years old, but you’ll be amazed at how much money you can save up by starting this early in life. There are a few options available to you when saving up for retirement. 401K plans are the most popular accounts because they are opened through an employer and anything you put into the fund is matched by your company. You can withdraw on the account at any time in your life, but you’ll be subject to taxes and fees for doing so before you reach the age of retirement.
There are also self-directed IRAs available to those who want to open a fund through a bank and have an account that will gain interest each month. Unlike other types of bank funds, an IRA gains a lot more interest and this amount can be quite substantial if you have the IRA opened for a long period of time. Before opening any type of account, you need to read the fine print before signing along the dotted line and putting your money into something that might not yield as much as you need.
Taking Care of Your Health When You’re Older
When you’re older, it’s important that you take care of your health to avoid blowing through your retirement savings because of medical bills. The best way to do this is to open a health savings account HSA fund. The HSA is a savings account specific to healthcare needs. You’ll put money into the fund each month and if you get sick in the future, the money will be there for you when you need it.
Understanding Tax Penalties
There is no tax penalty for taking money out of a retirement fund once you reach the age of 62. If you want to take money out before you reach the age of retirement, you’ll be subject to fines, taxes and penalties because these accounts are not meant to be touched before they’re needed. You should talk to your bank about penalties associated with retirement funds and what to expect when withdrawing money.