| There will be many terms you will come across during | | | | As someone who has closely watched taxes, FICA, |
| your research that will be somewhat confusing until | | | | and Fido get my money for years I can say that it is |
| you get the terminology down. The path to financial | | | | no less painful for me but some find it comforting and |
| doesn't have to be as complicated as we tend to | | | | that is a real benefit. Finally and perhaps the most |
| make it. | | | | important thing to consider is that many employers will |
| I would like to take this opportunity to encourage you | | | | match a percentage of your contribution up to a |
| to seek the guidance and advice of a professional | | | | certain amount each check. As an employee this is a |
| financial planner. The resources and knowledge that a | | | | boost to your investment that is well deserved and |
| competent financial advisor can share with you will be | | | | hard earned. I hope you appreciate the implications it |
| invaluable when it becomes time to make the decision | | | | has on your future earnings. |
| that will affect how your retirement savings are put to | | | | You should keep in mind that the penalties for |
| work for your retirement. | | | | accessing these funds early are harsh indeed in order |
| We go to a mechanic for mechanical advice (at least I | | | | to discourage this practice from occurring. Take care |
| do) so it only makes sense that we would go | | | | that you do not over-invest in these funds to the point |
| someone who has trained in financial matters for | | | | that you will need to access them in times other than |
| financial advice. | | | | dire emergencies. |
| Getting back to business, when it comes to financial | | | | IRAs are another creature all together. You will find |
| retirement planning you should find that both IRAs and | | | | much stricter limitations on IRAs than on 401 (k) plans |
| 401 (k) plans have strengths and weaknesses. | | | | beginning with the fact that if your employer offers a |
| There are also limitations as to how beneficial they can | | | | 401 (k) you must make very little money in order to |
| be when used in combination with one another as well | | | | qualify for the tax deductions that this particular |
| as their own limitations. Every benefit that aids you in | | | | retirement fund generally allows. |
| taxes and retirement should be considered carefully | | | | The maximum yearly contribution for your IRA will be |
| before leaping. | | | | $4,000 or 100% of your annual income; whichever is |
| Let's first look at the 401 (k) plan. This is a plan that | | | | greater up until the age of 49. Once you've reached |
| offers a few benefits that are much preferable to | | | | the age of 50 you can invest an additional $1,000 to |
| many over other retirement plans. The first thing you | | | | your fund. The other major drawback when it comes |
| might want to consider is that you can invest up to | | | | to an IRA is the fact that you must begin receiving |
| 15% of your salary or a maximum of $15,000 per year | | | | payments at the age of 70.5 from your account. You |
| (as of 2006). | | | | will also be heavily penalized if you make an early |
| Of course that is assuming that your employer doesn't | | | | withdrawal from these funds. |
| have limits on how much you can invest. The money | | | | Whether you choose a 401 (k) plan, a Traditional IRA, |
| invested in your 401 (k) account is pre tax money so it | | | | or both for your financial retirement investments, I hope |
| lowers the amount of taxes you are paying out of | | | | you will take the time to discuss the benefits and |
| each paycheck. Many people also find that because | | | | disadvantages of each with your financial advisor |
| the money is taken from their checks before it arrives | | | | before making your final decision. |
| it is far less painless to part with. | | | | |