Have you put together a retirement plan yet? If not, there’s never been a time to put one together. Today, you have a ton of options when it comes to retirement accounts. For example, a traditional IRA would give you a tax-advantaged way to save for retirement. Also, you could open a 401(k) to save some of your pre-tax income.
How to Create a Retirement Plan
When planning for retirement, one has to look at their expenses and income. If you plan on maintaining a similar level of expenses, you’ll have to plan for that. So, look at how much you’ve spent over the last year, including debts.
Then, compare your expenses with how much you’ve gained on any investments. Typically, you can safely withdraw about 3% of your investments each year. Anything more than that would risk drawing off its principal.
So, if you need to bring in $100,000 a year, you need at least $3,000,000 invested. That way, you can pull out that much without affecting your overall investment.
To make this happen, there are plenty of accounts you can use to save. One of the best is a 401(k), a type of defined contribution plan. Once you’ve set them up, you can put money in without paying taxes. Then, when you’re ready to withdraw, you’ll pay taxes on everything.
Since you can avoid paying taxes upfront, your investment tends to grow larger. So, by the time you’re ready to withdraw, you’ll have more than you would have otherwise.
