{"id":9578,"date":"2018-04-06T09:00:52","date_gmt":"2018-04-06T15:00:52","guid":{"rendered":"https:\/\/www.lexingtonlaw.com\/blog\/?p=9578"},"modified":"2024-05-06T13:08:23","modified_gmt":"2024-05-06T19:08:23","slug":"retirement-101-where-to-begin","status":"publish","type":"post","link":"https:\/\/www.lexingtonlaw.com\/blog\/life-events\/retirement-101-where-to-begin.html","title":{"rendered":"Retirement 101: Get on the Path to a Bright Financial Future"},"content":{"rendered":"<p><a href=\"https:\/\/www.lexingtonlaw.com\/blog\/wp-content\/uploads\/2018\/04\/retirement-101.jpg\"><img decoding=\"async\" class=\"aligncenter size-large wp-image-11679\" src=\"https:\/\/www.lexingtonlaw.com\/blog\/wp-content\/uploads\/2018\/04\/retirement-101-600x199.jpg\" alt=\"retirement couple\" width=\"600\" height=\"199\" srcset=\"https:\/\/www.lexingtonlaw.com\/blog\/wp-content\/uploads\/2018\/04\/retirement-101-600x199.jpg 600w, https:\/\/www.lexingtonlaw.com\/blog\/wp-content\/uploads\/2018\/04\/retirement-101-1100x364.jpg 1100w, https:\/\/www.lexingtonlaw.com\/blog\/wp-content\/uploads\/2018\/04\/retirement-101-768x254.jpg 768w, https:\/\/www.lexingtonlaw.com\/blog\/wp-content\/uploads\/2018\/04\/retirement-101-300x99.jpg 300w, https:\/\/www.lexingtonlaw.com\/blog\/wp-content\/uploads\/2018\/04\/retirement-101.jpg 1510w\" sizes=\"(min-width: 767px) 600px, calc(100vw - 35px)\" \/><\/a><\/p>\n<p>If you\u2019re younger than 30, chances are you\u2019re not thinking about retirement. It\u2019s a long way off, you\u2019re just getting started in your career and you have your whole life ahead of you. For all these reasons, it\u2019s the perfect time to get started on saving for retirement. You can make minimal contributions that will grow over time and allow you to retire in comfort.<\/p>\n<p>While many retirees live on the money they receive from Social Security, this may not be an option for future generations. Projections show that the <a href=\"https:\/\/www.ssa.gov\/oact\/TRSUM\/\">Social Security trust fund <\/a>could be depleted by 2034. If you expect your retirement to continue after that date, you need a contingency plan. This Retirement 101 primer offers a roadmap to prepare for your future.\u00a0<\/p>\n<h2><strong>Setting Retirement Goals<\/strong><\/h2>\n<p>First, you need to figure out how much money you need to live comfortably in retirement. Here are some things to consider when planning for retirement:<\/p>\n<ul>\n<li>Current household income, both before and after taxes<\/li>\n<li>Age you plan to retire<\/li>\n<li>Goals for retirement, such as where you want to live and your desired lifestyle<\/li>\n<li>Current and future budget<\/li>\n<\/ul>\n<p>Create an estimated budget for retirement that represents 80 to 100% of your current income. For example, if you bring home $5,000 a month, make a retirement budget of $4,000 to $5,000 a month. Be as detailed and realistic as possible.<\/p>\n<p>Plug the numbers into a <a href=\"https:\/\/money.cnn.com\/tools\/savingscalc\/savingscalc.html\">retirement calculator<\/a>. This will give you a savings goal to strive toward.<\/p>\n<h2><strong>Types of Retirement Plans<\/strong><\/h2>\n<p><a href=\"https:\/\/www.lexingtonlaw.com\/blog\/wp-content\/uploads\/2018\/04\/LEX_275347_RetirementPlans.png\"><img decoding=\"async\" class=\"aligncenter size-full wp-image-12680\" src=\"https:\/\/www.lexingtonlaw.com\/blog\/wp-content\/uploads\/2018\/04\/LEX_275347_RetirementPlans.png\" alt=\"retirement 101\" width=\"653\" height=\"1171\" srcset=\"https:\/\/www.lexingtonlaw.com\/blog\/wp-content\/uploads\/2018\/04\/LEX_275347_RetirementPlans.png 653w, https:\/\/www.lexingtonlaw.com\/blog\/wp-content\/uploads\/2018\/04\/LEX_275347_RetirementPlans-167x300.png 167w, https:\/\/www.lexingtonlaw.com\/blog\/wp-content\/uploads\/2018\/04\/LEX_275347_RetirementPlans-223x400.png 223w\" sizes=\"(min-width: 767px) 600px, calc(100vw - 35px)\" \/><\/a><\/p>\n<p>Once you\u2019ve gathered the necessary data, you can begin to explore the investment options available for retirement funds.<\/p>\n<h3><strong>401(K)<\/strong><\/h3>\n<p>Matching 401(k) programs are commonly offered to workers as an employer benefit. If you haven\u2019t started saving for retirement, start by contributing to an employer-sponsored 401(k) if available. This type of retirement fund offers several advantages:<\/p>\n<ul>\n<li>Employer matching programs. Many employers match a percentage of the employee\u2019s 401(k) contribution up to a certain threshold.<\/li>\n<li>Tax advantages. Money put in a 401(k) comes from your pre-tax income, which means you aren\u2019t taxed on your contributions until they are withdrawn at retirement age. You\u2019ll likely be in a lower tax bracket when you retire, so your tax burden will be even lower.<\/li>\n<li>Investment savings. Many funds are offered at a discount to 401(k) programs compared to what you would pay if you purchased them on the open market.<\/li>\n<\/ul>\n<p>These are some potential 401(k) downsides:<\/p>\n<ul>\n<li>Contribution limits. For 2019, you can only contribute up to $19,000 to a 401(k) if you are younger than 50 or up to $25,000 after age 50. The <a href=\"https:\/\/www.irs.gov\/newsroom\/401k-contribution-limit-increases-to-19000-for-2019-ira-limit-increases-to-6000\">IRS<\/a> adjusts this threshold each year based on cost of living.<\/li>\n<li>Limited selection. You won\u2019t have much control over where your money is invested with a 401(k).<\/li>\n<li>Tax disadvantages. You are required to take distributions beginning at age 70.5 and these withdrawals are taxed as ordinary income.<\/li>\n<\/ul>\n<h3><strong>IRA<\/strong><\/h3>\n<p>An IRA, or individual retirement account, is available to all individuals without employer involvement. Many tax experts recommend starting your retirement savings with an IRA if you don\u2019t have an available 401(k) through your employer or if your employer doesn\u2019t offer a matching program.<\/p>\n<ul>\n<li>Tax advantages. As with a 401(k), the funds come from your pre-tax income.<\/li>\n<li>Investment selection. This type of retirement account offers more control and flexibility than a 401(k).<\/li>\n<\/ul>\n<p>However, there are some negative aspects to an IRA:<\/p>\n<ul>\n<li>Tax disadvantages. Money is taxed as regular income when you retire. If you need to make early withdrawals, they will be subject to additional tax. As with a 401(k), you must take distributions starting at age 70.5.<\/li>\n<li>Contribution limits. You can put away up to $6,000 in an IRA for 2019, or $7,000 if you are older than 50.<\/li>\n<\/ul>\n<h3><strong>Roth IRA<\/strong><\/h3>\n<p>A Roth IRA is similar to a standard IRA, but it\u2019s funded with after-tax income. Since you\u2019ve already paid taxes before investing in a Roth IRA, withdrawals are tax-free. For this reason, a Roth IRA is a good choice if you expect substantial income growth over the course of your career. You\u2019ll be able to pay taxes on the investment while you\u2019re in a lower tax bracket.<\/p>\n<p>There are other advantages of a Roth IRA:<\/p>\n<ul>\n<li>Unlike funds that carry a penalty for distributions before retirement, Roth IRA funds can be withdrawn at any time. Minimum distributions during retirement are not required.<\/li>\n<li>Fund selection. With a Roth IRA, you can control the choice of funds and can choose from diverse investments.<\/li>\n<\/ul>\n<p>The Roth plan does have downsides as well:<\/p>\n<ul>\n<li>Low contribution threshold. Like a traditional IRA, you can contribute $6,000 in 2019 or $7,000 if you are older than 50.<\/li>\n<li>Income limits. Higher-income individuals are not eligible to contribute to a Roth IRA. For 2019, this program phases out at annual income of $137,000 for single filers and $203,000 for married couples filing jointly<\/li>\n<\/ul>\n<h3><strong>SIMPLE IRA<\/strong><\/h3>\n<p>Self-employed individuals and small business owners can contribute to a Savings Investment Match Plan for Employees (SIMPLE) IRA. This type of account requires a matching contribution from your employer (whether that\u2019s yourself or a company you don\u2019t own, but are employed by), and is taxed under similar rules as a traditional IRA. You\u2019ll contribute pre-tax dollars, but you will be taxed when you begin to withdraw the money.<\/p>\n<h3><strong>SEP IRA<\/strong><strong>\u00a0<\/strong><\/h3>\n<p>A Simplified Employee Pension (SEP) IRA is similar to a SIMPLE IRA, but does not require a matching employer contribution. Match programs that are offered must be the same percentage for each employee. Contributions made by the employer and by self-employed individuals are tax-deductible.<\/p>\n<h2><strong>Other Retirement Plans <\/strong><\/h2>\n<p>Although the options described above are the most common types of retirement plans, countless other plans exist. Each has unique tax advantages and disadvantages. The <a href=\"https:\/\/www.irs.gov\/retirement-plans\/plan-sponsor\/types-of-retirement-plans\">IRS<\/a> provides detailed information about less common plans and how they are taxed.<\/p>\n<p>When you get your credit score on track, you\u2019ll save money by qualifying for lower interest rates. When less money is going toward repaying debts, you\u2019ll have more freedom to begin building your next egg for retirement.<\/p>\n<hr \/>\n<p>Take the first step on the path to a brighter financial future by repairing your credit with Lexington Law Firm. <a href=\"https:\/\/www.lexingtonlaw.com\/\">Call us today<\/a> for a free personalized credit consultation to see how we can help you.<\/p>\n\n\n<p>You can also start up a conversation on our social media channels. Like and follow and interact with us on <a href=\"http:\/\/www.facebook.com\/LexingtonLawFirm\">Facebook<\/a>,<a href=\"https:\/\/www.instagram.com\/lexingtonlaw\/\"> Instagram<\/a>, and<a href=\"https:\/\/twitter.com\/lexingtonlaw\"> Twitter<\/a>.<\/p>\n\n\n\n<p><em>Article Updated June 2019<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>If you\u2019re younger than 30, chances are you\u2019re not thinking about retirement. It\u2019s a long way off, you\u2019re just getting started in your career and [&hellip;]<\/p>\n","protected":false},"author":63,"featured_media":11679,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[527],"tags":[513,331],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v18.1 (Yoast SEO v18.3) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Retirement 101: Get on the Path to a Bright Financial Future - Lexington Law<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.lexingtonlaw.com\/blog\/life-events\/retirement-101-where-to-begin.html\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Retirement 101: Get on the Path to a Bright Financial Future\" \/>\n<meta property=\"og:description\" content=\"If you\u2019re younger than 30, chances are you\u2019re not thinking about retirement. 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