Here’s how to start your retirement plan TODAY.
It’s no secret that I love planning for the future. I love to-do lists, finding new ways to budget and calculating our retirement accounts. I just love to think about the future.
I have to catch myself though. Because thinking about the future can lessen the memories I make today.
You know what else I love? Compounding interest. It’s magical.
I wanted to share a piece of advice for starting your retirement plan:
Start an Roth IRA. Like now.
A Roth IRA is great because any distributions (after 59 1/2) are nontaxable. How is that possible you ask? Good question!
Any contributions to a Roth IRA are made with after-tax dollars. That means taxes are already taken out of your wages. Your wages are more than likely what’s being used to fund your IRA. When you are eligible to withdraw the money, the distribution is a tax-free event. There are exclusions: such as being 59 1/2, having a major illness, paying for higher education, being a first-time home buyer, etc. I would recommend talking to a financial planner before withdrawing any funds.
Here’s my next piece of advice to starting your retirement plan:
Setup automatic drafts from your checking account.
The hard part to funding any retirement plan is actually putting money into it. Life gets in the way and the money you think you’re going to put into your IRA is suddenly gone. Establishing an automatic payment each month is easy. It takes a signed form and voided check to do for most accounts.
Trust me when I say the hard part is done when you setup an auto investment on your IRA.
My third tip:
Want an extra edge on growing your retirement account even more? Increase your investment with every raise. I know the cost of living will go up, but more than likely you don’t need your entire raise to live off of. So as soon as you get a raise, call your financial advisor or the company that hosts your IRA. With one call or completed form you can increase your investment amount each month. Let’s be honest, you’ll never miss the extra money.
Want my pro tip? Look at your budget to find how much you can afford each month. Once you have that number, add $5 more to it. Surely you can live without $5 in one of your categories. Taking $5 from your eating out envelope won’t affect you in the long run. That extra $5 will add up in your IRA though.
You always want to push yourself to invest a little bit more.
For more information on how to start your retirement plan today, call your financial advisor. Don’t have a finance expert? Ask around or look one up. Having an expert in your corner always pays for itself in the end.