Finance Quick Answers
How do I begin saving for retirement?
- Pay yourself first! Set aside a certain percentage from each paycheck to invest in your retirement fund. If possible, have money automatically withdrawn from your paycheck or account each month (For additional information on saving, see Getting Started Saving.)
- Know your options. Find out if your employer offers any retirement plans and if they match money that you contribute. There are other options such as Individual Retirement Accounts (IRA). Be aware that there are limitations on the amount that can be put into an IRA. (See IRS Publication 590 for more information.)
- Don't withdraw early from your retirement funds for other uses. It will be difficult to replace those funds at a later time and you will suffer a great loss in compounding interest. Also, you will have to pay a steep penalty for early withdrawal.
- Consider tax implications. Most retirement investments are either tax-deferred or tax-exempt. On a tax-deferred investment, you will not pay taxes until you withdraw the funds. On a tax-exempt investment, you will not ever have to pay taxes. If you can delay taxes (or not pay them at all) your money can grow at an even faster pace because nothing is being withdrawn.
Dr. Joyce Cavanagh, Former Assistant Professor and State Specialist, Consumer and Family Economics
Last update: Thursday, July 24, 2008