- Social Security – After you’ve paid into the Social Security system your entire working life, you deserve to finally sit back and collect payments. Social Security is the foundation of your retirement income, and the rest of your savings and investments should be built on it. Calculate your steps, in order to maximize your benefit. You have to make sure you’ve paid in for an appropriate number of years, and that you sign up at the best age for you.
- Medicare – Sudden health problems will require significant health care expenses. You could easily spend a significant part of your savings, although Medicare will largely make sure that doesn’t happen. You could sign up three months prior to your 65th birthday, and it would be highly recommended to do so, to avoid higher premiums if you sign up later. By retiring before age 65, you’ll need an alternate plan to obtain and pay for health insurance.
- 401(k) – Workers who’ve decided to contribute to a 401(k) plan get more valuable employer contributions, tax breaks and a great chance to have the money withheld from their paychecks before they get a chance to spend it.
- Roth 401(k) – A Roth 401(k) has the same contribution limit as the traditional 401(k), only that the tax treatment is different. You can make Roth IRA contributions with after-tax dollars, but withdrawals in retirement from accounts that are at least five years old will be tax-free. This means that you won’t have to pay tax on the earnings you accumulate in that account.
- IRA – By investing in an individual retirement account, you can receive similar tax treatments to 401(k)s, except that the contribution limits are lower. What you need to know is that many people prefer building a larger IRA balance, by rolling over their 401(k) balance to an IRA every time they change their job. IRA contributions are due after April 15, while 401(k) contributions must be made by the end of the calendar year.
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