How & When to Start Saving for Retirement
Retirement may be decades away, but it’s never too early to start investing, even just a small amount at a time.
Your action plan
Make the most of your 401(k) employer match
If your employer offers a 401(k) plan and will match your contributions, don’t leave that “free money” on the table! Because contributions are taken from your pay before your employer withholds income tax, you may be able to reduce your tax bill, and more of your money will be able to go to work for you.
If your employer doesn’t provide a match, it’s still important to invest as much as you can now and let your earnings have an opportunity to work in your favor.
Consider opening an individual retirement account (IRA)
You may want to think about opening an IRA in addition to or instead of a 401(k) plan if your employer doesn’t offer one. Even if you have a 401(k), you may have more investment choices through an IRA.
Whether you choose a Traditional or Roth IRA will depend largely on your income and age. (If you’re a small business owner, you may also be able to contribute to a small business IRA).
Your contributions can grow tax-deferred (you don’t pay taxes until you take a distribution, unless you’ve made a non-deductible contribution). Contributions may also be tax deductible.
Contributions are made on an after-tax basis; future withdrawals on contributions and earnings are generally federal tax-free if you meet certain criteria.1
Compare IRAs to see what’s right for you. If you open an IRA, our automatic investment plan makes it easy to invest a small amount on a regular schedule, automatically.
Looking for more ways to save & invest? Max out your 401(k)
If you’re able to save and invest more, keep it going and make additional contributions to your 401(k). You can invest up to $18,000 annually for 2016, which will set you on a good track for the future and reduce your income tax burden even more. You can also contribute to an IRA.