Purse Ho
You’re not alone if you think you’re too old to start saving for retirement. Nearly half of Americans think so, according to a recent poll commissioned by Human Interest, a retirement benefits provider.
The study surveyed more than 2,000 Americans: half between 18 and 29 years old and the other half between 30 and 64 years old. Of the latter, 47% said it may be too late to start saving. And 46% of people aged 18-29 also thought you might be running out of time to save.
Although the survey did not specify when respondents believe the threshold was reached, any belief that it is too late to save can be detrimental, according to financial advisers. Many financial experts believe that, regardless of age, something saved is better than nothing.
“Better late than never,” says Brent N. Bruggink, director of pension services at CG Financial Services in Williamston, Michigan.
“If you’re at the bottom of a 30-50 year range, you’d still have 20-30 years to invest for a successful retirement,” says Bruggink. “Even if you’re 50 or older, you could potentially have 10 to 20 years of retirement investment.
The benefits of saving for retirement now
No matter what stage of life you’re in, there are plenty of ways to start saving for retirement now. According to the survey, half of respondents save for their retirement via their checking or savings accounts. However, most checking accounts do not pay interest on your money. And the average interest rate for a savings account is 0.06%, according to the FDIC. Even the best high-yield savings accounts currently only pay around 0.50%.
On the other hand, the average annualized return of the S&P 500 – an index that tracks the stocks of America’s largest companies – over the past 10 years was 13.6%, according to data collected by Goldman Sachs.
Investing can be daunting, especially with constant reminders of market volatility in the news. But it pays to weather the storm.
“Stock market crashes happen, but stocks eventually recover,” says Alvin Carlos, managing partner of District Capital Management, a financial planning firm in Washington, D.C. “And in the meantime, you can buy stocks cheaply. .”
Bruggink says some people nearing retirement may need to invest more aggressively to try to make up for lost time. They may therefore need to place a higher allocation in equities than their counterparts with large savings. Regardless of your age, a well-diversified portfolio can help you achieve your personal goals.
And you don’t need a workplace retirement plan like a 401(k) to build a diversified portfolio. You can open an Individual Retirement Account (IRA) yourself and enjoy the same benefits.
A traditional IRA allows you to make tax-deductible contributions to your account. This means it can lower your tax bill or increase your tax refund. Low-income savers may also qualify for a savers tax credit. Money in your IRA grows tax-free until you make qualifying withdrawals at age 59.5 or older. But be careful not to dip your hand into the cookie jar early. This can mean heavy tax penalties. As an alternative, you can trade tax-deductible contributions for tax-free retirement withdrawals when you open a Roth IRA.
For 2022, people age 50 or older can contribute an additional $1,000 to their IRA or Roth IRA to a maximum of $7,000.
How to Open an IRA
Generally, you only need to have earned income, be at least 18 years old, and have a Social Security number or tax identification number to open an IRA or Roth IRA.
You can open an IRA online through most banks or investment management companies such as Fidelity Investments, Charles Schwab, or Vanguard.
So, after deciding where you want to open your IRA, you typically follow these steps.
Choose the type of IRA you want: Your options usually include the traditional IRA or the Roth IRA.
Fund your account: This usually involves linking a checking account from which you will contribute money to your IRA.
Choose your investment options: Most IRA providers allow you to invest in virtually any securities world. This includes stocks, bonds, ETFs, mutual funds, and even cryptocurrency in some cases.
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