We would like to use this blog to show how everyday people can become debt free and build a strong financial future for themselves. In past posts we have talked about some of our history to becoming debt free and the strategies we used to accomplish the goal. Going forward we would like to share some of our next goals and how we plan to achieve them. Our main long term goal is saving for our retirement.
In today's work environment most people have lost many of the benefits people used to take for granted. Pensions, which gave people a monthly paycheck for the rest of their lives, funded by the companies many worked for have began to be cut or even frozen for many employees. We are included in the group of people having our pension frozen. This has now put the majority of the savings burden on the individual. There are many savings routes for individuals to carry this burden including the 401k or 403b plans many have available through the employers. These two accounts are very similar only the 401k is usually offered by for profit-employers while the 403b is offered by non-for-profit employers. These accounts currently allow a person to save up to $18,000 a year. Many employers also make matching contributions to these accounts. For example, if the company matches three percent, an individual making $100 would contribute $3, then the company would also contribute $3 into the account. That is automatically doubling your savings! This is why if you work for an employer offering matching contributions it is very important to at least invest up to the matching point. The contributions are also taken from your weekly paycheck prior to taxes.
Two other retirement investment options available are the Traditional and Roth IRA accounts. These both have contribution limits of $5,500 a year. The main difference between the two accounts are the Traditional IRA account contributions are not taxed today, but when withdrawn at retirement and the Roth IRA you pay taxes on contributions today, but not when withdrawn at retirement. There are rules and income limits to participate in these accounts. It is best to check with a financial advisor on the details of these accounts.
Knowing how much you need to save for retirement is probably one of the most difficult things to figure out. It is very difficult to look 10, 20, or even 30 years into the future and there is no one right answer for anyone. Some people will need more, some less, but the one thing I know is I would like to error on the side of saving to much over not having enough when the time comes. There are all kinds of theories and calculators out there to help you determine a number needed so that you will not run out of money in retirement.
While working our way through college we were both lucky to work with several different individuals along the way. One person that sticks in my mind was about 62 years old working at a grocery store. "It is a lot different working because you want to, than because you have to" is the one comment from him that hit home. I was only in my early 20's when I worked with that man, but the more years go by, the more I understand what he meant.
