Keeping with the theme of financial freedom, the future is unpredictable and a lot of companies have stopped offering the traditional pension plans. If you are one of those lucky ones that have the pension plan, well then you are LUCKY! The goal is start earlier. However, if you could not save for retirement earlier in your life, you need to consider increasing the amount of money you put towards retirement.

However, most companies offer a retirement savings plan such as the 401 (k) or the 403 (b)’s.

I take advantage of these plans, since this is a channel for me to save for my future and how can you go wrong with the fact that these are tax deferred. With a regular 401(k) plan, money is deducted from your paycheck before taxes are withdrawn, which lowers your taxable income and therefore, lowers your taxes.

So now we are past the reasons as to why I want to save for my retirement and let’s look at the investment portion. Once the money has been deducted from my paycheck the money is put into investments as your company may have chosen for their employees. We have age based investment options and a lot of 401 k plans offer these options. Say for instance, you are expected to retire in 2030, the age based investment options are set up to be aggressive, conservative or somewhere in between. So based on the market conditions you will see your money grow or now. The goal is to keep the money in a specific investment for a longer period of time to take advantage of the dollar cost averaging.

Now for the free money, each time money is deducted from your paycheck, your employer will match you upto a certain percent. So say for instance:

You make (pre tax): $2,000 per paycheck

Your Company Match is 5%

The company deducts: 0.05 * 2,000 = 100 towards the 401(k)

The company matches upto 5% of salary per paycheck: So they contribute 100 towards your retirements.

You are getting free money! How can you go wrong.

For those that do not work for a company or are self employed think about IRA’s that you can open at banks.

The next time you decide to look over your retirement think twice.

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