While retirement may not be for many years, it’s important to start thinking about it now. Saving for retirement can ensure you will be able to take care of yourself when you aren’t working anymore.
Many companies provide pension plans to their employees, but many of them do not end up amounting to as much as people would like them to and need to live comfortably in retirement. For this reason, it’s wise to set up a pension plan or two outside of your employer’s plan.
Individual Retirement Account
The Individual Retirement Account, or IRA, is a good way to save your money, while benefiting from tax breaks.
There are four types of IRA’s:
- Traditional IRAs
- Roth IRAs
- SEP IRAs
- SIMPLE IRAs
Only two of these are suitable for single mothers though: the Traditional and Roth IRAs. The SEP and SIMPLE IRAs are for business owners, so they can set up retirement plans for their employees.
About Traditional and Roth IRAs
A traditional IRA is one that many people choose because they don’t want to worry about paying taxes on the money before putting it into the account, which means more money can be placed in it. The downside is that when you withdraw the money at retirement, you’ll have to pay taxes on it, which could be a hefty amount.
A Roth IRA does it the other way around. Instead of paying taxes when you withdraw the money, you pay taxes when you deposit it. While you may not end up putting as much money into the account, you won’t have to worry about paying any taxes at retirement, which could be quite a relief.
This type of IRA also allows some flexible. You can withdraw money early, or you can allow it to grow for as long as you would like. This is different from the Traditional IRA. It doesn’t allow you to withdraw money early, and you must withdraw your money at 70 ½ years of age.
How to Start a Traditional or Roth IRA
Visiting your local bank is the best way to open a Traditional or Roth IRA. Simply speak to the financial advisor about completing the paperwork, and she will explain the contribution limits and interest rates available. While some banks vary with interest rates, there isn’t usually a huge discrepancy.
Once you complete the paperwork, the advisor will explain that the money will come out of your paycheck before or after taxes depending on whether you chose a Traditional or Roth IRA.
Sit Back and Relax Now and into the Future
With a Traditional or Roth IRA set up, you’ll be able to breathe a sigh of relief knowing you’ve set aside money, so you won’t have to worry about filling prescriptions, pay co-pays for doctors’ visits, buy food, pay for a mortgage or rent and utilities, etc.
You’ll be able to feel confident in your ability to enjoy your retirement in the way that everyone should – in total relaxation and happiness.