Starting To Plan For Your Retirement While In College
Most young people do not start saving for retirement until their later years. It is important to start preparing and saving for retirement as early as possible in order to maximize income during retirement. If you've not already started saving, now is not too early. Starting to think and plan in your college years is a smart way to get a head start.
Q: What is a retirement plan?
A: A retirement plan is also often referred to as an IRA, pension plan, pension account, retirement savings account, retirement account, or retirement program. A retirement savings plan is a plan set forth by an individual in order to have money available once they retire and are no longer permanently employed. If a person plans smart and early enough they can have enough money to live off of comfortably, allowing them to make the best of their retirement years.
- Prepare for retirement – Ten tips on ways to prepare for retirement.
- Social Security Online – Retirement planner which will help to determine your life expectancy, approximate retirement age, and estimate your Social Security benefits.
- Securing your financial future – Answers to frequently asked questions about different retirement plans and ways to start preparing financially.
- Money basics – Understand retirement planning, social security, and how to set retirement goals.
- Personal budgeting – Help for newly graduated college students to plan personal budgeting and retirement savings.
Q: Where does money for retirement come from?
A: The money for retirement can come from multiple sources. It can come from private savings, investments, employer sponsored retirement plans, and through social security benefits. The most applicable for college aged individuals are private savings. Private savings come from any money a person saves throughout their life. This can be done by depositing a set amount of money on a consistent basis in checking or savings accounts and letting it accumulate over time.
- Managing and saving money – In-depth information about how to manage and save money.
- Social Security – Information about Social Security benefits and how they relate to retirement planning.
- Retirement money – In-depth information about where retirement money comes from.
- Retirement accounts – Information on how to coordinate estate planning and retirement accounts.
- Employer sponsored plans – Employer sponsored plans such as 401k plans, money purchase plans, and profit-sharing plans.
- Individual retirement accounts – IRA and the Roth IRA.
- Whether or not it is a good idea to borrow against retirement plans. – Answers to frequently asked questions about making donations from individual retirement accounts.
Q: What are some of my investment options?
A: Investment options to help a person prepare for retirement include investing in a personal savings account, an employer based savings retirement plan such as a 401k, an individual retirement account (IRA), or a Roth IRA. Personal real estate, businesses, and other equities that are invested in can also help to fund retirement.
- Personal savings – This worksheet will help determine how much a person may be responsible through retirement. By using this worksheet they can estimate how much they may need to save if they have no other retirement savings plans.
- Stocks and bonds – Here people can learn more about investing in stocks and bonds to help fund their retirement.
- Investments – Learn a strategy for making investments in order to help fund retirement.
- Estate planning – Determine other investment options that will help contribute to retirement savings such as real estate, businesses, and fixed income securities.
- Retirement definitions – Definitions for investment options such as stocks, bonds, mutual funds and multiple retirement savings accounts.
Q: What is the difference between 401k and an IRA?
A: With a 401k retirement plan money is automatically taken out of a person's paycheck and placed into the retirement savings account. With an IRA the individual determines the amount they will contribute and then that set amount is deducted from their taxable income. The 401k is an employer sponsored account. The contribution to a 401k account or a traditional IRA is taken from a paycheck prior to taxes being paid which means that the taxes will have to be paid upon withdrawing the money from the account. A Roth IRA is the complete opposite. Taxes are taken at the time of contribution, meaning there are no taxes to be paid when money is withdrawn.
- 401k – Answers questions such as what is a 401k plan, how does a 401k plan work, what's the difference between a 401k plan and a 403(b), and other retirement plan options.
- Traditional IRA – Basics of the IRA and multiple other retirement plans as well as how they work.
- Roth IRA – Fundamentals and conversions of Roth IRAs.
Q: How much should I save?
A: How much a person should save for retirement first depends on their age. Social Security benefits will only cover about twenty-five percent of their retirement income. The younger the person, the smaller the percentage of income they will need to put back. For instance, someone in their early twenties will only need to save about ten percent of their income but a person in their late twenties will need to save about fifteen percent. The higher a person’s age when starting to save the higher percentage they will need to save. There are other determining factors such as the age a person plans to retire, any investments, or employer based savings they may have already started.
- How much should I save? – Worksheet to determine how much a person will need when retirement age is reached.
- Retirement calculator – Enter the requested into this retirement calculator in order to determine help plan an investment strategy.
- AARP retirement calculator – Retirement calculator from AARP has a person answer a few questions which will help determine if they are saving enough, when they can retire, and how long their retirement money will last.
- Retirement income calculator – This retirement income calculator will help determine how much of a person's monthly income retirement savings will provide them in their retirement.
- Retirement savings calculator – This calculator will help estimate the future value of savings and how much more a person will need to save.
- Roth IRA savings calculator – For those that have invested in a Roth IRA or are considering doing so, this calculator will help determine the amount in savings at the age of retirement based on contributions.
- Retirement checklist – This list provides a person with information as to how to prepare to retire from their place of employment.
- 401k savings calculator – This calculator will help determine the amount of a person's 401k savings at the age of retirement based on personal and employer contributions.
- Savings calculator – This savings calculator will help show a person just how contributing consistently will make their savings grows.
Eventually everyone will reach the age in which they can no longer work and will depend on the income they have saved. This income can be through personal savings, individual or employer sponsored retirement plans. Many people do not consider the consequences of not thinking about how they will survive financially through their retirement years. The sooner a person starts saving, the better.
Written by Rachel Summit