As traditional pensions continue to disappear, more and more people are responsible for saving for their own retirement. Hi, I am Mary Beth Franklin, Senior Editor with Kiplinger's Personal Finance magazine, and I am here to tell you the five best ways to save for retirement. First, as soon as you go to work, sign up for your company's 401(k) plan.
In fact, more and more employers are actually enrolling workers automatically. That means, you are in the plan unless you say no, and trust me, you don't want to do that. Ideally, you want to save as much as you can for retirement, but hey, you have to eat and pay the rent, right? So if your company offers a match, you want to try to save at least as much as to capture the full match, otherwise you are walking away from free money. As your salary increases, try to earmark some of those raises for retirement savings.
Ideally, you want to try to save about 15% of your gross salary for retirement, but hey, don't panic; some of that money can come from your boss's matching contributions. Do this and you will not only build a substantial nest egg, you will also save on taxes, because most retirement plan contributions are not taxed. Once you save enough money in your employers 401(k) to capture the match, think about putting money into a Roth IRA. You can save upto $4,000 in a Roth IRA this year. There is no upfront tax break, but all the money that comes out of retirement is tax free, and you can use the money penalty free to pay for college, or to buy a first home. Once you turn 50, you get the added benefit of catchup contributions. You can contribute an extra $5,000 to your 401(k) this year, and an extra $1,000 to your IRA. I am Mary Beth Franklin, and these are the basics.
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