Retirement planning isn’t something adults in their 20s or 30s think too much about, but it’s useful to start planning early. Here are five tips for young adults who are just starting their careers, or older ones who haven’t started planning yet:
1. Once a company hires an employee, there is usually a waiting period until the employee can enjoy the company’s benefits—around 30 days to six months for small firms and about 90 days for larger firms. If you’re newly employed, wait until the benefits become available, and immediately save funds into your 401(k) account so the money can begin compounding.
2. The two most popular retirement plans are the Roth 401(k) and the traditional 401(k), so chose wisely and research on which one provides the best benefits. Money deposited into a traditional 401(k) won’t be taxed during the year of the deposit, but will be taxed upon withdrawal. With the Roth 401(k), tax is paid upon deposit, so you would not have to pay tax when you withdraw the money.
3. Some companies automatically put their employees into a retirement plan. In these cases, you should carefully investigate if that plan is best for you, and check up on it often.
4. If you switch jobs, do not take money out of your retirement account. Instead, to avoid penalties, transfer it into your account at the new company, leave it in the old account, or transfer it into another Individual Retirement Arrangement (IRA).
5. Once it is time to withdraw money, use it carefully, because it is easy to spend more during retirement than in working life. Retirees tend to spend more money on travel, entertainment, health care, and household maintenance.
1. Once a company hires an employee, there is usually a waiting period until the employee can enjoy the company’s benefits—around 30 days to six months for small firms and about 90 days for larger firms. If you’re newly employed, wait until the benefits become available, and immediately save funds into your 401(k) account so the money can begin compounding.
2. The two most popular retirement plans are the Roth 401(k) and the traditional 401(k), so chose wisely and research on which one provides the best benefits. Money deposited into a traditional 401(k) won’t be taxed during the year of the deposit, but will be taxed upon withdrawal. With the Roth 401(k), tax is paid upon deposit, so you would not have to pay tax when you withdraw the money.
3. Some companies automatically put their employees into a retirement plan. In these cases, you should carefully investigate if that plan is best for you, and check up on it often.
4. If you switch jobs, do not take money out of your retirement account. Instead, to avoid penalties, transfer it into your account at the new company, leave it in the old account, or transfer it into another Individual Retirement Arrangement (IRA).
5. Once it is time to withdraw money, use it carefully, because it is easy to spend more during retirement than in working life. Retirees tend to spend more money on travel, entertainment, health care, and household maintenance.
