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Saving for Retirement: How to Save and What Types of Accounts to Use
 

Saving for Retirement: How to Save and What Types of Accounts to Use

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Until about 30 years ago most people could rely on a pension when retiring. Times are different now and most people have a Individual Retirement Account plan offered through their employers. If you work for an employer that offers a retirement plan you should join the plan especially if the employer matches a percentage of your contributions.

Failure to do so is like refusing free money. Not to mention the tax benefits there are to an IRA account. With the highest savings account rates and bank CD rates not really high right now every penny ads up.

If your employer offers a retirement plan you should join the plan and contribute as much as the plan allows you to. When your employer matches your contributions you have even more of an incentive to join. I never heard of an employer matching 100% of an employees contributions but you'll find most employers match up to 50% of what the employee puts into the IRA.

The younger you are and the earlier you get started the more money you can save. Time will be on your side and your savings account will grow with compound interest over time. The best way to make money is to have your money make money for you! This is exactly what you're doing when you save money and save money in a retirement account.

Many times people change jobs and do nothing about their retirement account with their old employer. If you change jobs you should move your IRA account over to your new job's retirement account and continue with the maximum amount of contributions you can make.

Get the highest CD rates by searching online on RatesoRama.com. You can also get a list of mortgage rates today from many different mortgage lenders without providing any personal information.

If you decide you want to cash in your retirement plan early that would be a big mistake. Of course if you lose your job and can't find another job quickly you might have no choice but to cash in your retirement account. Unfortunately you'll have to pay taxes on the money since the money went into the account tax-free. You will also have to pay a penalty for withdrawing money early. The penalty will probably be about 10% of the amount you take out.

If you take money out to reinvest it in another area it is important that you do not directly receive it. If you receive the money directly, you will have to pay a 20 percent withholding tax on the amount you receive and then file for a refund in the next year, providing proof that you have transferred the funds to say a different IRA. To avoid this headache just have the money transferred into another IRA you have established or to another qualified retirement plan.

Are you self employed or work for a company that doesn't provide a retirement plan? Well you're not out in the cold, if you are self-employed, you can start a Simplified Employment Plan (SEP) or a Savings Incentive Match Plan for Employees of Small Employers (SIMPLE).
Author: James Martin
October 10th, 2011