Whether you’re working your first job or in the midst of a successful career, it’s never too early to be thinking about your retirement. Even if it is years away, you want to make sure you’re on the right path. Here’s what you should know about saving, retirement plans, and staying on the right track for your golden years.

Saving for Retirement

Saving for retirement can be a challenge, but there are different retirement plans that you can sign up for to make the process a little easier. Some of the most common plans include:

401(k)

A 401(k) is an extremely common retirement plan if you’re an employee in a larger company. However, not all workplaces may offer a 401(k), so you’ll need to check whether or not it’s available at your job. 401(k) plans allow you to put a portion of your income in an account for when you retire. Not only is this money deducted from your taxable income, but your employer will often match a certain amount of those contributions too. 


Although many people retire around the age of sixty-five, the IRS stipulates that people must start withdrawing from their 401(k) accounts once they reach the age of seventy. Additionally, anybody who takes money out of the account before the age of fifty-nine may have to deal with fees or penalties.

Solo 401(k)

Since 401(k) accounts usually go through your employer, they aren’t often an option for business owners. In this case, a solo 401(k) is a one-participant plan designed for individuals who are self-employed or own their own businesses (but don’t have any employees of their own).

Roth IRA

With a Roth IRA, you can put earned income into a retirement account, but you will need to pay taxes on it. You can continue to add money to the account for as long as you like, and there are no stipulations about when you need to start withdrawing money. One perk of a Roth IRA is that, while you do pay taxes on your earnings, the money can grow inside the account tax-free.

403(b)

Less common than a 401(k), a 403(b) is typically used for people that work for tax-exempt organizations, like a church or a non-profit company. This is similar to a 401(k), and your earnings will grow tax-free until you decide to withdraw them in retirement. Like other plans, you may face certain penalties or fees if you decide to take out money before the age of retirement.

Related: Increase Your Tax Return With These Common Deductions

Managing Your Retirement Savings Wisely

Since many people start retirement plans when they’re younger, managing those savings as they grow over the years isn’t always easy. When you hit a financial roadblock, it can be tempting to dip into those savings. However, withdrawing too much money from your retirement can mean throwing off your plan and making things more difficult for yourself when you do retire. 


The first step to managing your retirement savings is putting it in a retirement plan (like a 401(k) or a Roth IRA). The tax breaks that you’ll receive with a retirement account are often essential in order to hit savings goals. 


Not to mention, retirement plans often let you put your money into stocks or bonds so that it will grow faster over time (rather than using a low-interest rate with a regular savings account). Depending on how old you are, you can choose high-risk stocks that can maximize your returns or low-risk stocks that will minimize your losses. If you aren’t sure, getting advice from a financial expert is always a good idea.

Calculating Your Income Needs

When you decide how much money to put in your retirement plan every month, you’ll need to calculate your income needs as well. Your Social Security statement can give you an idea of how much you can expect from those benefits, but most people need a little extra help to live comfortably. This is where your retirement savings can come in. 


The first step is figuring out how much money you’ll need on top of your Social Security benefits. It’s always a good idea to err on the side of caution with your calculations. Once you retire, you may have unexpected expenses that you didn’t have before (such as medical costs). If you have specific goals about where you’d like to live or go when you retire, you’ll need to consider those when you make your calculations as well. 


Keep in mind that, although you can get an idea of what your Social Security benefits may be ahead of time, there are no guarantees that the check will be as big as you thought. Future changes to the Social Security program could reduce the benefits you receive or, in some cases, completely eliminate them. 


Regardless of where you may be at in the retirement process, it’s never too soon to start saving for the future. Some people may believe that Social Security will provide them with all the income they need to live on, but this is rarely true. In most cases, putting a portion of your income in a retirement plan can help you live comfortably when you’re older and prepare for unexpected expenses you might not have now.

Related: Here Are All Of The Best 2020 Senior Discounts