Saving for Retirement

Piggie Bank

Saving for retirement can be confusing, but in this day and age it’s essential to start contributing to your retirement fund as soon as possible. Since there are numerous different types of funds out on the market, it can be hard to figure out which one or two will provide the best benefits for you. Here are the  5 most popular types of retirement funds.

1. 401(K)/ 403(B)
This is the easiest one to maintain as many companies offer it to their employees. If your company does have one, it’s the easiest way to start saving and investing for retirement. Your investment is automatically deduced from your payroll. One company benefit is that they will match your contributions up to a specific percentage. If this is offered to you, it’s recommended to take advantage of it. In 2015, individuals were able to save up to $18,000 pre taxed dollars.

2. IRA
An IRA is the  second most popular way to contrbute to a retirement fund. Any individual is able to open an account and contribute to it. You can only add in $5,500 a year, but you can contribute to other retirement funds if you have them. The money that you add into it will grow tax-free. If you don’t get a retirement fund from work, you will get a full deduction regardless of income levels. When you turn 70 though, there is a mandatory withdrawal rule.

3. Simple IRA
If you work in a company that has less than a 100 employees, this might be your best match. It allows you to set up an IRA with significantly less paperwork. An employer is obligated to make contributions that either match or not. In 2015, individuals were allowed to contribute up to $12,500 dollars.

4. Roth IRA
With all the types of IRA’s, it can be rather confusing to break it down. With a Roth IRA, you contribute with your after-tax dollars and get no tax-deduction for your contribution. The money added into is not taxable if you withdraw it after you turn 60 and grows tax-free in the meantime. However, to add to a Roth IRA, you must make less than $131,000 dollars as an individual

5. Health Savings Account
This might be one that doesn’t come to mind when people think retirement account, but it is one that will allow you to save your money tax-free. You can add up to $3,350 dollars a year and withdraw from it to pay for approved medical costs. If that money is not spent though, it is eligible to roll over with no consequences. If you withdraw it after 65, there is no penalty and must only pay the income tax. If it’s before 65 and any reason besides medical then you must pay an income tax and face a 20% penalty.
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