Have you started thinking about retirement? If you haven’t you might want to start. With the recent economic downturn, Social Security retirement will soon become non-existent. The government has already started looking into increasing the retirement age from 65 to 67 by the year 2022. What would that mean for the average senior citizen?
Well, instead of receiving more than a full benefit by the age of 66, they will only receive partial benefits and wouldn't get full benefits until 68. Looking at the future of social security, I wouldn't expect to get any benefits at all. If you are a working adult (at any age), you have the power to secure your own retirement benefits.
Traditional IRA or Roth IRA?
Deciding between a Traditional and Roth IRA should not be too hard. It’s basically choosing which one is practical for you.
A Traditional IRA is open to anyone, regardless of how much your income is. You can start withdrawing money at 59 ½, but you have an obligation to pay taxes on capital gains, interest, or anything that was earned on the account in previous years. You are also required to withdraw by 70 1/2. This type of account is tax deductible.
A Roth IRA does not have so many restrictions. Yes, there is a limit to the amount of income that you can make in a year before you can qualify. Other than that, you can withdraw principal contributions at anytime without a penalty and the principle and what you earn on the account is tax free. However, this type of IRA is not tax deductible.
The one thing that you want to consider with these two accounts is whether or not you want to pay taxes when the account is first opened (Roth IRA), or pay it when you begin to withdraw your retirement money (Traditional IRA). Think of it as when you will face the highest tax rates: now or in retirement?
If you happen to work for a small company that has 100 or fewer employees, talk to your employer to see if they offer a simple IRA or simple 401K. If they do, this will be great for you because whenever you invest into your account, your employer will contribute also. This can add up to significant savings that can be very beneficial once you retire.
Simple Savings Account
If you do not already, I strongly encourage you to open a savings account strictly for you, when you reach retirement age. The earlier that you start this account the better. Each paycheck you should designate a percentage to go into this particular account and just let it accumulate. The savings will be a nice added bonus for when you’re ready to retire.
If you have been considering retirement options and you’re not sure exactly which one is right for you, don’t give up. There are definitely many other options out there and you should do your own research. The important thing to remember is that you want to be in control of your own financial future. You make think that you’re investing money from your paycheck each month into social security, but that is far from the truth. It is NOT an investment anymore and there is no guarantee for social security.
When you decide to retire, you deserve to have an account with money waiting for you so that you can withdraw from it and be able to finally relax. Create your own retirement!
Readers, what do you think about the future of Social Security and the need to fund your own retirement?