No one really wants to think about retirement. For most of us it is decades away, and not really at the forefront of our minds. However one day all those will grow old, and will wish to leave the work force. To do this we need to make sure we have enough money to live on. There are many savings and investment plans available to us-how do we know where to start? Here’s a guideline of how you should save your retirement money:

  1. 401(K) with an employer match: Even if your employer has a weak match ( .25 on the dollar up to 5% ), always contribute as much as needed to get the maximum match. Even at a quarter on the dollar, that’s a 25% return, in addition to the earnings on your investment. This is free money, and there’s no reason not to take every penny of it.
  2. Roth IRA: You Roth contributions go in after tax, so you don’t get the fancy tax deduction. But your retirement-age withdrawals are tax free - contributions and earnings. And one of the really neat things about a Roth is that you can take out your contributions at any time, without penalty. You shouldn’t, of course, but I like the fact that you have the choice.
  3. 401(k) without employer match: If your employer isn’t as generous as some, you might not get a 401(k) company match. But you should still sock some money away here, since you do get the current-year tax deduction. Withdrawals are taxed, of course, but tax-deferred is better than nothing at all.
  4. Taxable investments: Regular index funds, mutual funds, stocks, bonds, etc go here. These are important, of course, but don’t offer the tax advantages of the first 3 accounts. Only play around in this area once you’re contributing enough in the first three programs.

By investing your money in this manner, you’re likely to come out ahead when it’s finally time to hang up your shirt and tie, and retire. The most important rule is this - Maximize the Match. Recite it, repeat it, and remember it. Even a weak match ( .25 on the dollar ) is a guaranteed 25% return on your money, even if your investments stay completely flat. That type of guarantee doesn’t exist anywhere else. Use it, maximize it, and profit from it. No one wants to be broke when they’re retired. Investing your money smartly will help keep that from happening.

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