Investing in an IRA is an effective way to make sure you’re setting aside a retirement nest egg for years to come. according to companies like SoFi, with a Roth IRA, you can put in a lump sum right away. Since its taxable, you will likely have less income tax in the future. Depending on your tax bracket, you could save up to 30% in taxes, compared to taking a regular deduction from your paycheck. With a Roth IRA, you cant withdraw money until you’re 59.
However, the Internal Revenue Service requires you to take a distribution by age 70 or earlier. If you’re between 55 and 59 and your Roth IRA cant give you money because you haven’t reached age 59, there are strategies that will allow you to use your IRA without having to worry about distribution issues. Take advantage of a 401(k) or another company plan that allows for automatic withdrawals at retirement age. You will likely lose the savings penalty if you do so. This could allow you to defer taxes on your income for longer.
Alternatively, if you are not a U.S. citizen, consider using an Individual Retirement Arrangement (IRA). These IRA accounts allow you to take a withdrawal at any time and can let you keep most of your savings for many years. Contribute to a retirement plan on your own. If you are only contributing to a 401(k) plan, start small. Assume you are able to contribute 1% of your income each month for the first 3 years and then you’re fully contributing to your 401(k) at age 50.
Once you’re retired, contribute an additional 3% and, if you aren’t very wealthy, start adding 3% per month as you earn more. Withdraw after retirement. If you are only withdrawing money from your 401(k), start with 1% every month until you’re fully withdrawn at age 70. After this, withdraw 1% more each month until you’re fully withdrawn at age 59. You could also contribute to a traditional IRA, as long as the money is currently going to your employers plan. After that, you can sign up for WECU and increase your savings.