Christian Community Networking

  By Dale Philyaw

Everyday money matters.

Everyday! Money matters.

Everyday money! Matters

Everyday money matters!

Everyday money matters?

RETIREMENT ESSENTIALS

No matter where we place the emphasis the statement or question has significance in our lives. We will continually refer to everyday money matters. This discussion will start the conversation with steps that are essential to planning for an enjoyable retirement.

Are you taking advantage of all the benefits offered by your employer, are you contributing at least up to your employer’s match into your 401K, TSP, or TSA account? If not you are giving up free money. Most employees will match funds made into your retirement account. The match normally ranges from 50 cents to a dollar for dollar match up to a certain percentage.

If you are not contributing at least the amount that your company matches, you are in essence giving money away. If you do not contribute the company does not provide these funds to your account. If your are fortunate enough to work for a company that matches on a dollar for dollar basis you are in effect earning 100% on your investment, not a bad return. Of course depending on the investment options selected you will earn an additional return on top of the company match.

The very first step in planning for your retirement, should be taking advantage of your 401K, TSP or TSA by contributing at least up to the company match. The investment will put you on your track to reach your retirement goals. The additional savings provided by the pretax contribution are icing on the cake.

After taking advantage of the company match, consider funding a Roth IRA. A Roth IRA is funded with after tax dollars and grows tax free. The younger you are the better, the more time available for tax free growth. Remember a person in their fifties is young and can still take advantage of the Roth. The Roth IRA does not have required the minimum distribution associated with the Traditional IRA since it is funded with after tax money; Uncle Sam is not concerned with when you access your money. This allows flexibility in gaining access to your funds.

Each person should look at their unique situation; some may find that contributing to a Traditional IRA to be beneficial as it may reduce taxable income. The IRS has established income limits on this benefit. You must compare the immediate benefit of tax reduction to the benefit of tax free growth offered with the Roth IRA.

Often the benefits of the Roth will provide advantages that should be considered. The Roth can be used as a supplement to the tax deferred 401K, TSP or TSP accounts discussed in step one. Some employers are now offering a Roth 401K the basics are the same as a normal 401K account, but the account is funded with after tax money and offers tax free growth with a higher contribution limit than the Roth IRA.

Take advantage of the company match, fund a Roth IRA and start on the path to successful retirement planning. There are many investment decisions to make for your plan to be effective. These are essential to get you started.