Retirement might be just around the corner for you, or it could be a long way off. At some point in life, we all must ask ourselves the question, “When should I start saving up for retirement?” The right answer is also the simplest: as soon as possible.
While everyone’s situation is different, putting away even a small amount each month as soon as you start earning income is beneficial. This allows your investment the most time to generate gains. If you’re self-employed, work at a smaller company, or have yet to start on a professional career path, you might not have access to a 401(k) retirement plan.
However, you can still explore individual retirement accounts, which let you put away up to $6,000 a year as of 2020. Traditional IRAs are tax-deferred, meaning contributions can be deducted from taxes the same year they’re made. Roth IRAs are tax-free, which means you will not be taxed upon withdrawing your funds in retirement. Roth IRAs are typically better for those who expect to be in a higher tax bracket upon retirement, while traditional IRAs make more sense for people who might fall into a lower bracket down the road.
This begs the question of how to start saving for retirement if you’re currently on a tight budget. With a cash-out refinance, you might have to look no further than your home! Depending on your eligibility, you could potentially have extra money in your pocket each month or leverage your 401k to pay off your home. The possibilities are endless!