Читать книгу Mutual Funds For Dummies - Eric Tyson - Страница 68

Uncle Sam gives major tax breaks for retirement account contributions. This deal is one you can’t afford to pass up. The mistake that many people at all income levels make with retirement accounts is not taking advantage of them and delaying the age at which they start to sock money away. The sooner you start to save, the more confident you can be in having enough to retire comfortably, because your contributions have more years to compound.

Each decade you delay approximately doubles the percentage of your earnings that you should save to meet your goals. For example, if saving 5 percent per year starting in your early 20s would get you to your retirement goal, waiting until your 30s may mean socking away 10 percent; waiting until your 40s, 20 percent; beyond that, the numbers get troubling.

Taking advantage of saving and investing in tax-favored retirement accounts should be your number-one financial priority (unless you’re still paying off high-interest consumer debt on credit cards or an auto loan).

Retirement accounts should be called tax-reduction accounts. If they were called that, people might be more excited about contributing to them. For many people, avoiding higher taxes is the motivating force that opens the account and starts the contributions. Suppose you’re paying about 35 percent between federal and state income taxes on your last dollars of income (see Chapter 10 to determine your tax bracket). For most of the retirement accounts described in this chapter, for every $1,000 you contribute, you save yourself about $350 in taxes in the year that you make the contribution. That means you have $1000 in your retirement savings and $350 in your pocket that didn’t go to federal and state income taxes versus just $650 left for you after taxes if you don’t contribute. You can invest all of this savings until it’s taxed when withdrawn in retirement. Some employers will match a portion of your contributions to company-sponsored plans, such as 401(k) plans — getting you extra dollars for free.

On average, most people need about 70 to 80 percent of their annual preretirement income throughout retirement to maintain their standard of living. If you haven’t recently thought about what your retirement goals are, looked into what you can expect from Social Security (okay, cease the giggling), or calculated how much you should be saving for retirement, now’s the time to do it. My book Personal Finance For Dummies (Wiley) goes through all the necessary details and explains how to come up with more money to invest.

When you earn employment income (or receive alimony), you have the option of putting money away in a retirement account that compounds without taxation until you withdraw the money. With many retirement accounts, you can elect to use mutual funds as your retirement account investment option. And if you have retirement money in some other investment option, you may be able to transfer it into a fund company (see Chapter 16).

If you have access to more than one type of retirement account, prioritize which accounts to use by what they give you in return. Your first contributions should be to employer-based plans that match your contributions. After that, contribute to any other employer or self-employed plans that allow tax-deductible contributions. If you’ve contributed the maximum possible to tax-deductible plans or don’t have access to such plans, contribute to an IRA. The following sections include the major types of accounts and explain how to determine whether you’re eligible for them.