There’s a time for every purpose it is said and that applies quite well to retirement planning.
The stages of life and profession call for different strategies and use of resources, a matter considered by Emily Brandon, staff writer for U.S. News on money matters. Let’s examine her report.
Preparing for a comfortable retirement begins in the years before reaching age 49, Brandon says. The compounding effect on savings placed in a 401(k) or IRA (traditional or Roth), to say nothing of the tax breaks, is amplified by starting the process early. A specialist quoted in the article notes that Roth IRAs work exceedingly well for young people: they pay the taxes now at their currently applicable rate, which is likely lower than what they’ll owe later in their careers. Meanwhile, the investment can grow securely behind a tax-protected shield.
Interesting options open up once you reach age 50, Brandon says. “Catch-up” contributions to a 401(k) totaling $6,000 can be made, taking the total allowed deposit for this year to $25,000. A similar bonus top-up can be made to an IRA, this time amounting to $1,000, in 2019. Anyone fearful of a shortfall in their retirement accounts or who simply wants a more comfortable life in retirement would do well to make these bonus payments, she says.
Ready to retire at 55 or older? A withdrawal from the 401(k) linked to the person’s last job can be made without penalties. People who roll the 401(k) balance into an IRA must wait until they are 59½ before they can take these penalty-free withdrawals, however.
For more information, please read:
10 Important Ages For Retirement Planning | US News