You may have a very idealistic vision of retirement--doing all of the things that you never seem to have time to do now.
But how do you pursue that vision?
Social Security may be around when you retire, but the benefit that you get from Uncle Sam may not provide enough income for your retirement years. To make matters worse, few employers today offer a traditional company pension plan that guarantees you a specific income at retirement.
Estimating Your Retirement Income Needs
You know how important it is to plan for your retirement, but where do you begin? One of your first steps should be to estimate how much income you'll need to fund your retirement. That's not as easy as it sounds, because retirement planning is not an exact science. Your specific needs depend on your goals and many other factors. However, by doing a little homework, you'll be well on your way to a comfortable retirement.
Saving for Your Retirement
You have several options for saving for your retirement. How do you know what to do? Here's one common approach.
A traditional individual retirement account or individual retirement annuity (IRA) is a personal savings plan that offers tax benefits to encourage retirement savings. Funds in a traditional IRA grow tax deferred until they are withdrawn. Contributions may be fully or partially tax deductible, depending on certain factors.
A Roth individual retirement account (IRA) is a personal savings plan that offers tax benefits to encourage retirement savings. Contributions to a Roth IRA are not tax deductible, but the funds grow tax deferred and distributions are tax free under certain conditions.
A well-diversified portfolio can help balance risk. The earlier you start investing, the more you can contribute over the course of your working lifetime. By starting early, your investments will have a longer period of time to compound.
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