Woodside in neighboring Bucks County has taken the title of the richest location in Pennsylvania with a median household income of $186,453. Image via Wikipedia.
You must be an active participant to build your retirement wealth, says The Washington Post’s personal finance columnist, Michelle Singletary. “It’s not like you go get a lotto ticket and you become rich instantly. Wealth doesn’t happen that way,” she says.
Here are a few basics of retirement savings:
1. Save as early as you can.
The longer you have to save and invest, the more likely you will reach your goal.
Investing early lets you take advantage of compound interest. Start with a couple hundred from each paycheck in your early 20s and with 7 percent compound interest growth, you will have $800,000 waiting for you when you retire at 70.
2. Include stocks in a retirement fund
The stock market gives you about a 7% return each year over the long haul, allowing retirement funds to grow without you doing any extra work.
3. Matching funds
If your company offers a company-sponsored retirement plan that includes employer matching contributions—take it. Employer plans usually provide between 2% and 5% of take-home pay to invest with.
4. Do the math
Figure out your retirement goal.
Increase your contributions with that goal in mind, at least up to the point where your company will match it.
Ultimately, try to save 15% of your gross income each year for retirement.
5. Types of retirement accounts
Many company-sponsored plans are 401(k). Non-profits have a 403(b).
Some plans base investments on age.
Others require homework to make sure you’re investing in the lowest-cost option.
You can set up an Individual Retirement Account (IRA) meaning no taxes are due until you withdraw it in retirement.
The exceptions are Roth IRAs when taxes are paid upfront as you invest. Roth IRAs are good for younger investors who will likely be in a lower tax bracket now than when they retire.
Don’t get too hung up on types of retirement accounts. Just save.
If you’re lucky enough to be working and saving extra cash during COVID-19, right now could be a really good time to get started.
But no matter how COVID-19 has affected your job or finances, these are good tips to remember.
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