Creditnet's Guide to Building a Good Retirement Fund
SEATTLE, WA--(Marketwired - Jul 11, 2014) - Retirement draws closer every day for many people in the United States, and with the baby boomer generation coming "of age," there are many more people saving for retirement than ever before. Creditnet.com, an online financial expert, has recently announced the top ways to keep a retirement fund full, as well as how to build a good retirement fund in the first place.
When Should Saving For Retirement Begin?
Creditnet.com suggests that younger people start saving as soon as possible. Many people of the younger generations are struggling to keep cash flows up and are busy paying off new cars and new houses. Utility bills keep arriving at the front door, and many younger people are new to managing their savings and checking accounts. This combination of new expenses and inexperience leads to many money issues, but Credinet.com states that there are still ways to be on track to retire with a plentiful retirement account.
Several steps that this site suggests are getting educated on what and when to save, signing up for an employer's 401(k) plan, sign up with a Roth IRA plan if there is no 401(k) plan offered by an employer, explicitly plan to save by setting goals and sticking to them, and avoiding debt and interest by staying away from certain purchases while paying for other purchases in cash if possible. Taking these tips into account can help younger generations start to save.
Who Should Be Saving?
In short, everyone should be saving for retirement. Anyone who has disposable income should consider their future before they dispose of it on something that will only bring a limited amount of pleasure. Unfortunately, this is not the case with many younger people.
Should Retirement Accounts Be Used to Pay Debts?
Creditnet.com warns that this could be a very costly mistake for many people with traditional retirement accounts. The site warns savers to be aware of the terms and conditions for early withdrawal from the account. In many cases, there may be a tax penalty of up to 10 percent to withdraw this money early. Not only that, but early withdrawal may be considered earning income, which can carry tax rates up to 40 percent. Savers should consider these costs of using retirement money to pay off debts before they withdraw their funds prematurely.
Consider the Options
Creditnet.com warns everyone to research what they are getting into before they open a retirement account. Not only are there several different accounts available, including ones like IRAs, 401(k)s, and 403(b)s, they all carry their own terms of conditions and standards of operation. There may be limits to how much can be added to an account for the year without large tax penalties being levied, especially on tax-free retirement accounts. There may also be stipulations that the saver cannot use their account before they turn a certain age, which is usually fifty-nine and a half years old. There may even be rules that an employer places on the account if it is provided by the employer. Many times, employers will help contribute to the account, sometimes doubling what the employee puts in. All of these factors need to be researched and weighed before just getting the account that your friend or colleague suggests.
Consider the Time Value of Money
For anyone who has taken a basic finance class, the time value of money may sound familiar. This is the concept that, over time, money compounds itself and adds interest so that a dollar saved today is worth more than a dollar tomorrow. Creditnet.com uses this concept to explain, once again, the importance of saving for retirement as early as possible. They use the example of a 20 year old who starts saving $200 a month, each month, until they are 65 years old. At an average rate of return of six percent, this person would end up having a retirement account of $550,000. If that same person were to start saving at 40 years old instead, they would only have $138,000 saved by the time they are 65.
For more information about retirement and savings, access Creditnet: http://www.creditnet.com/
About Creditnet:
Creditnet.com aims to help responsible people, both young and old, save for retirement. They have articles published that show the importance of saving early, how to keep a retirement account full, and how to build a good retirement fund.
