You know that you have to save money for retirement but you’re not quite sure how to put money away in a retirement fund. There are a number of options available, each of which offers its own benefits and downsides.
We’re going to discuss these below, helping you make the absolute best decisions with your money.
Ready to learn more? If so, then let’s go!
How Much Money Should You Save for Retirement?
Though everyone has different needs, in general, it’s recommended that you save 10% to 15% of your pre-tax money for retirement. Putting these funds into a retirement account will enable them to grow over time, leaving you with substantial amounts of money upon retirement age.
The Best Ways to Put Away Money for a Retirement Fund
There are a variety of ways to save money in a retirement fund, each of which offers different benefits and drawbacks. We’ll discuss these now.
If you’re looking for a safe, yet beneficial way to save money for retirement, look no further than the 401(k). These are the most common retirement funds, as they’re generally sponsored by employers, some of whom will actually match percentages of their employees’ contributions to said funds.
401(k)s are pre-tax funds. So, whatever you put into them, you don’t have to pay taxes on it. Note, though, that they essentially restrict your money until you retire (though you can pay a big fee to take money out). Not to mention, their potential ROI pales in comparison to some other retirement funding options.
If you’re an investor, or if you like to live somewhat dangerously, you could put your money in a brokerage account. Then, you could invest it in stocks, bonds, mutual funds, and the like.
Generally speaking, it’s not wise to do this with all of your retirement money. This is because there’s a risk (though it’s small) of you losing everything. Instead, you should put only, say, a quarter of your retirement funding into your brokerage account.
401(k)s are a good, safe option but they don’t allow you to invest much. If you want to invest your retirement money at a higher interest rate, you should put it into a traditional IRA. These carry far fewer limitations in terms of investment options.
Make note, though, that traditional IRAs have fairly low maximum limits. As such, you’ll likely want to combine an IRA with a 401(k).
If you want some flexibility with your retirement money, you should consider a Roth IRA. This requires you to pay taxes on the money that you put into it but doesn’t require you to pay any taxes when taking money out of it.
Note, though, that you must make under a certain amount of money in order to qualify for a Roth IRA. For more information on the matter, check out this site.
Looking for More Money Saving Tips?
Now that you know how to put money in a retirement fund, you might be looking for more ways to save money. If so, our website has you covered.
Check out a few of our other articles now!
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