Many people look forward to retirement as a reward for decades of hard work. It’s also gives you time -- finally -- to do the things you really want to do. But without a paycheck, you won’t have any cash unless you prepare for this time in your life by saving through a retirement fund -- or you inherit major bucks. You can play it safe and contribute to this fund with the dough you earn from 9 to 5 during all the years before it's time for that gold watch and a big sendoff.
Check out the retirement options available to you. If you’re working, asking HR if the company has a 401(k) plan where you can park income that is tax-deferred, or not counted in your taxes until you withdraw. If HR says “no” or you work for yourself, you can set up a tax-deferred Individual Retirement Arrangement, also called an Individual Retirement Account, or a Roth IRA; on a Roth you pay taxes on income you contribute when it's earned, but it's tax-free when you withdraw.
Determine how much money you need to save for the type of retirement income you want. The Employee Benefit Research Institute has links to several retirement calculators to help you figure out the amounts. It also has calculators that tell you what you’re getting from Social Security, assuming it’s still around when you retire.
Ask for an application form from HR, if you’re going with a 401(k). For an application to IRAs, you can contact banks, credit unions, brokerage firms or other financial institutions. Many fund services let you apply online. Before deciding on a particular fund or institution, ask about any minimum deposit requirements, annual maintenance fees, commissions and restrictions on investments. If you decide to transfer your retirement funds to or from another institution, find out if any transfer fees are involved. Also find out what kinds of reports you can get on how your funds are doing. For example, can you view your account online or call someone with any questions?
Fill out the application form. The info needed differs by fund but generally includes your name, contact information, Social Security number, driver’s license information, birth date, employer contact information and beneficiary. Some applications may ask you to designate the funds you want to put your money in, while others wait to do that after you set up your account.
Submit your application with any contributions to the fund. Contribute to your account regularly using the amounts you determined with the calculators. Many institutions allow you to automatically deposit funds from every paycheck or take regular amounts from your checking account each month. The earlier you start and the more you deposit, the more money you’ll have for that retirement life.
- Jupiterimages/Brand X Pictures/Getty Images
- What Can I Transfer My Retirement IRA Fund to Without Paying a Penalty?
- Can I Move My Roth IRA to Another Financial Institution?
- Rules on Rolling Over Employee IRA Accounts
- How to Contribute to the 401(k) and Roth IRA
- The Penalty for Cashing in Your Retirement to Buy a Car
- Can I Open a Mutual Funds Account While Unemployed?