Even though all of us face many pressing financial obligations every month, saving for retirement needs to be a priority if we don’t want to be caught in the dark. The best advice is to start saving early on in your employment. If you have the opportunity, maximize your retirement savings plans at work.
In putting aside money for retirement, you want to invest in risk-free, government backed securities. You won’t regret it. If pension plans aren’t offered at your work, consider setting up a Roth IRA.
A Closer Look at Roth IRAs
Roth IRAs are a fairly recent addition to the retirement options available, entering the scene in the late 1990s.Here are some of the specifications and benefits of a Roth IRA account.
- Make tax-free withdrawals. Unlike the traditional IRA, a Roth IRA doesn’t provide any upfront tax deduction.
- No lifetime minimum distribution requirements.In fact, you don’t ever have to make withdrawals from your Roth IRA account during your lifetime. This option enable you to accumulate tax-free money for future generations.
- Can make contributions even after age 70 1/2.
- Contribution limit is $5000 or $6000 if you are age 50 or over.
- It’s a good place to save emergency money because in the event of one, you can withdraw your Roth contributions without penalty or tax levy.
- Withdraw money after age 59 1/2 as long as your account has been in existence for 5 years.
There are many factors to consider when determining whether a Roth IRA is the right retirement plan for you. “If you are far from retirement and are in a lower tax bracket now, you are very likely to come out well ahead with a Roth IRA. If your income is too high to allow you to take a tax deduction on a regular IRA but low enough to qualify for a Roth, then there is no question that a Roth is right for you, since your contribution is made after tax in any event” (The Random Walk Guide to Investing: Ten Rules For Financial Success p. 72).