In this day and time, working part-time, I was blessed to have an 401 (k) to save towards my retirement, you rarely have that option. I am no longer employed with the company that provided me with a 401 (k) and with the universal time limits associated with handling a 401 (k), left me with a decision to make regarding it.
I am an avid reader, and I love numerous topics, one of which, deals with the above topic, “Personal Finance”. Needless to say, I have a few books on the subject. One book in particular, which I highly recommend, helped me to understand what my options are in a clear, informed, what step you need to take and why matter. It is, “Dave Ramsey’s Complete Guide to Money”. Within the book he covers numerous subjects, the one in particular that deals with the 401(k) and IRA, is called “From Fruition To Tuition”.
(Dave Ramsey, personally encountered financial troubles/difficulties, successfully got out of debt and has built an enterprise counseling, informing, teaching, and helping others with the subject of money with what he learned about it during his life experiences. For more information about Dave Ramsey and his services, visit www.daveramsey.com.)
Along with prayer, the information I received from reading about the topic in his book, talking with retirement representatives who work for the company that handles my 401 (k), and Google (Googling), I am able to make the informed decision of rolling my 401 (k) over into an IRA (Individual Retirement Account).
The next step is finding a financial institution to open my IRA at.
However, if I obtain another job that offers a 401 (k) before my time limit expires for me to do something with it, I can roll it over to that company and continue saving towards my retirement. Which is another plus. It would allow my 401 (k) to continue to grow by serving it’s purpose, to save towards my retirement.
For those of you who may be wondering, What is a 401 (k)?
In laymen terms, a 401(k) is like a savings account. The difference between a regular savings account and a 401 (k) is that the money that is put into the 401(k) goes towards your future retirement. The funds are earned by you working and they are taken directly from your earnings at a certain percentage and set aside in a 401 (k). Some companies even offer to match the funds that are deposited into your 401 (k), which is a plus.
If you are working a job where the company doesn’t offer a 401 (k), you can still save towards your retirement. You can establish your own IRA – Individual Retirement Account with a financial institution (Bank or Credit Union) of your choice. The only difference is, instead your employer establishing a retirement savings option for you (401 (k)) and putting those funds aside for you. You would be responsible for establishing and contributing to your nest egg, as some would call it, for your retirement.
If you are self-employed you can also save towards your retirement with an SEP – Simplified Employee Pension plan. As explained by Dave Ramsey in his book, “the SEP IRA acts like a big IRA for small business owners. Allowing you to deduct up to 15% of your net profit and in put it into the SEP pretax.”
What is an IRA?
An IRA is an Individual Retirement Account, that you set up at a financial institution to save towards your retirement. There is a certain contribution amount that can be deposited into the account and there is a certain interest rate that the money you deposit into your IRA increases at, as long as you don’t touch it. That’s the goal of the account, to save the money for retirement. If you take withdrawal from your IRA before the standard retirement age, there are penalties involved.
I should also mention that IRA’s have tax breaks as well.
Is it worth it?
Now that I am more informed of the benefits of having a 401 (k) and saving towards your retirement, I would say that it is. Not only that, the younger you start saving towards your retirement, the more you will have when you actually do retire.
So don’t hesitate, start now.
Until Next Time,
Bridget
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