Your company might offer a plan called a “401(k”)”. Even if your company doesn’t offer a 401(k) plan, you should get an IRA. IRAs are a form of compound interest that is not subject to tax and can help you build a substantial nest egg by allowing you to contribute as little as a few thousand dollars per year.
Yet, the IRS says that only 10 percent of those who are eligible for an IRA and can contribute to it actually do so. An IRA is not something you should be able to afford. You should consider that Social Security pays approximately $13,000 per year. If you cannot live on this small income, you will need to find another way to fund your retirement.
How can you determine if you are eligible for an IRA “Anyone who earns a taxable income or files a joint return with a spouse who earns an income can contribute to an IRA,”David Bach is the author of nine national bestsellers. “Start Late,” “Finish Rich” “The Automatic Millionaire.”Bach shared his views on IRAs recently with readers of SUCCESS Magazine. Here he gave the following advice.
Start Saving Early to Save for Retirement. The miracle of compound interest means that those who save early have the most money. “If you were to start at age 55, you’d contribute a total of $50,000 in the 10 years before you retire, at which point your account would be worth $72,433,”Bach. “By contrast, if you started at 25, you’d contribute $200,000 over the next 40 years, and by the time you retired, your account would be worth $1.3 million.”
Invest wisely. Although you can put the funds from your IRA in any way you like, some moves are more wise than others. Bach recommends “target date”These funds are specifically designed to help you save for retirement. This fund automatically ensures that you have investments that are appropriate for your age. It will act more aggressively in your younger years, and become more conservative as you get closer to retirement.
Know when to start withdrawing. Legally, you may withdraw funds from your IRA at the age of 59 and a quarter. However, if you are in a high-tax bracket, you should delay withdrawals.
SUCCESS magazine provides a balanced approach for successful living. It covers topics such as business, wealth and philanthropy. Visit www.SUCCESS.comYou can also search for the August issue to find the rest of Bach’s advice.
