What Are The Best Choices In Saving For Retirement?

Many Americans are giving up hope on the dream of retirement

, but they shouldn't be so quick to think it's not possible. Just because the country is coming off a tough economic downturn, that doesn't mean things will be rough forever, and if one is aware of the possibilities out there, it is still possible to grow one's retirement nest egg, even in depressed times. But how do you do it? What are the best choices in saving for your retirement? What kinds of accounts are the safest, and how do you deal with financial hardships and save at the same time?

All good questions, and while they may have simple answers, they're not exactly easy answers. First of all, start with your employment situation. If you work for yourself, then you will probably want to consider a Roth IRA or some other form of Investment Retirement Account. By investing money each year, you can cut down your tax burden - maybe even get a little back - and you can protect your money from the internal temptation to spend. IRA monies come with taxes and a penalty for early withdrawal, and so they will ensure that you are more likely to save over time. In addition to this big perk, they also allow you to invest in the stock market and in mutual funds without having to pay heavy commissions or taxes on capital gains until you are good and ready.

If you work for someone else, then you want to take advantage of a 401K, which operates in much the same way. With a 401K, the government allows you to invest with pre-tax dollars, which will ease your tax burden in the present and give you a buildup for retirement. With many employers, you could also get a match. A simple way of explaining how this may work: you contribute 5 percent and your employer contributes another 5 percent; do two, and your employer does 2. Normally, whatever you contribute, up to a certain point (probably 5 percent) will be matched by the company. At the same time, you can place your investment monies in a number of options like stocks, bonds, and mutual funds.

The last thing that you want to do, especially if you are in your thirties or younger, is depend on social security for retirement. The interest rates are laughably bad, especially when stacked against inflation, and the program will likely be busted in another 30 years anyway, which means you're throwing money away each year as it is. It is far better to plan for your own retirement, but to do that successfully, you've got to start now, invest wisely, and take gains a little at a time.

by: Gen Wright

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