By: The LearnVest Staff
The topic of retirement is daunting, we know. So take a deep breath, we’ll make it easy!
Retirement is expensive. We’re not just talking about fancy vacations; we’re talking about critical expenses like proper healthcare and trips to see your children.
Learn: Experts suggest that the amount you’ll need to live on during retirement equals between 70 and 90% of whatever you made in the years before that. Saving early makes a real difference.
If you contributed to a Roth IRA every year starting at age 20, you could retire as a millionaire! Here’s why time is your biggest asset: Chelsea and Katie both put in $24,000 over the years, but Chelsea began putting in money ($50 per month) at age 25 while Katie began saving ($100 per month) at age 45. Even though they both put in the same total amount, by the time they are 65, you can see that Chelsea has almost twice as much money to retire with as Katie. Thanks to compounding interest, Chelsea’s savings have earned more interest on interest over time than Katie’s.
We’ll say it again, starting early really matters. Time and compounding interest are everything to you. Retirement IS a discussion you should be having today.
Once you’ve committed to saving money for retirement, the next question is what’s the best type of account to save it in? Below are the three main retirement vehicles:
In a year, you can contribute to both a 401k and an IRA (Roth or Traditional). The three accounts are summarized below:
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