Fund Your 401(k)
If you are still employed and working, even if you are older than 70 1/2 , you can still make contributions to your 401(k) plan, if your employer provides one. A 401(k) is a very useful financial tool in securing your financial security in retirement. You will make contributions on a pre-tax basis which means you can deduct them in the same year you make them, your earnings will grow tax-deferred and you will be able to use employer matches to grow your nest egg even faster.
If your financial evaluation shows that you don’t need that money anytime soon, you can grow your 401(k) and pay long-term dividends. Make sure you also take a look at these 10 Hidden Drawbacks of 401(k)s That Will Leave You Speechless.
Fund a Roth IRA
Even if you already benefit from an employer-sponsored retirement plan such as the 401(k), starting a Roth IRA could be a really smart move in terms of financial planning and securing some sort of financial comfort in the long term.
For one, with a Roth IRA, you won’t have to take required minimum distributions…ever; the same cannot be said when it comes to 401(k) and SEP-IRA plans, which require RMDs after you reach 70 ½. For example, if you reach age 70 ½ in 2021 or later you must take your first RMD by April 1 of the year after you reach 72. More than that, your IRA qualified withdrawals are tax-free for your contributions as well as your earnings.
READ ALSO: 8 Types of Retirement Income That Are Exempt From Taxes
