Saving for retirement is not something you can do overnight. Instead, it takes decades for the average person to save enough money for this period in life. Some people save money in their employer-sponsored retirement plans, but what happens if you do not have one? If your employer does not offer a retirement plan, you might want to find other ways to save money. Here are some suggestions to consider.
1. Open an IRA
The first option you can use to save for retirement is an IRA, also known as an individual retirement account. You can choose a Roth IRA or a traditional IRA. If you use a traditional IRA, your contributions reduce your taxable income for the year you contribute. You will pay taxes on the money when you take it out of your account during retirement.
A Roth IRA requires paying taxes now on your contributions, so you will not have to pay taxes later. You lose the ability to reduce your taxable income when using a Roth IRA. You can open both types if you wish, but you cannot contribute more than the maximum annual amount to the accounts. A retirement planner can further explain how IRAs work.
2. Invest in the Stock Market
The second option you can use to save for retirement is stock market investing. Investing in the stock market does not offer tax credits or assistance, but it does provide a way to save money. The advantage of using the stock market is the ability to make a lot of money on the growth of your investments. The negative aspect is that stock market investing does not offer incentives for tax purposes.
3. Save Money in a Savings Account
You can also save money in a savings account for your retirement. The benefit of this option is that it is safe. Savings accounts offered by banks are FDIC-insured, which means you will not lose your investment. The downside to this option is that you will not earn a lot of money in interest because banks do not pay high-interest rates on savings account deposits.
If you are self-employed, you can also use a special type of retirement fund to save money. A financial planner can explain your options and help you set up the account of your choosing. If you want to start saving for retirement and need help figuring out how, meet with a retirement planner.