When you hear the word retirement, what do you think of? Far off, old people, dentures? Well you shouldnt. What you should think is, “do I have any?” and if you dont you should keep reading.
Retirement used to be the wonderful way in which your company provided you with a lifestyle after you got too old to work. Well that ship has sailed and now our generation is left to fend for themselves. Here is how you fend:
First let me introduce you to the two easiest types of retirement plans you can independently invest in:
401K
-Can withdraw funds at age 59 ½
-Money not taxed until you take if out
-16,500 Contribution limit per year
-Penalty for getting money early
-Capable of 401K loans
-Employer can contribute
-Money not taxed until you take if out
-16,500 Contribution limit per year
-Penalty for getting money early
-Capable of 401K loans
-Employer can contribute
Roth IRA
-Can withdraw funds at age 59 ½
-Money taxed when you put it
-$5000 Contribution limit per year
-Smaller penalty taking money out early
for approved reasons: home payments
and educational expenses
-Money taxed when you put it
-$5000 Contribution limit per year
-Smaller penalty taking money out early
for approved reasons: home payments
and educational expenses
If you ever work in some kind of office for even a little while and they offer you a 401K where they match the amount you contribute DO IT!! That is basically free money in your pocket. Get that 401K and contribute the max that your company will match! DO IT!
Now if you are like most artists you are never going to have this opportunity… sorry but you can create your own retirement plan with a Roth IRA. I would recommend the Roth IRA over the 401K for your personal retirement because the funds are more assessable., The money is tax-free when you take it out later and overall I find Roth IRAs are more user friendly. That being said the advice on how much to save can be applied to any fund you decide to use.
Basically after you have saved an 8 month cushion fund that you can access at any time as outlined in my previous savings post. you should now take that 10% and split it between a small assessable savings account for things like trips and retirement. While your ultimate goal for retirement should be to put the max in each year, when you are only making 24,000 a year or less it just becomes unrealistic. Instead I would say put at least $100 a month into retirement. As your salary increases how much you put in should also increase. When you get to a point where you can put in even more than $5000 a year into retirement (or whatever maximum your retirement account allows) start another savings account. Once that account is big enough put your money into some kind of CD. The good thing about retirement is that it shouldnt be liquid meaning your can put the money in accounts that will hold your money for longer but give you a bigger interest rate.
With your IRAs and 401Ks do your research, be smart about what you invest in and have a diversified portfolio and even pay someone to manage your retirement if it all seems like too much to handle.
For more information on being organized and financially stable visit The Financially Savvy Artist athttp://thefinanciallysavvyartist.tumblr.com/.
