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Retirement Options to ExploreIn history, retirees have depended on social security to provide enough money for them to retire. The social security payments are supposed to provide enough income for the bills that typically come with homeownership and life. Unfortunately, social security only pays a certain amount of money and many cannot live on what social security provides every month. Rising heating costs, gas prices, electricity rates, medical costs, pharmacy costs, and other necessities are forcing people to work well past the age of retirement.
It is essential to begin setting aside money for your retirement. This is the only way to ensure that you can enjoy the remaining years of your life without slipping into debt.
401K
Many employers offer matching contributions into a 401K program. This tax-free plan allows you to set aside a percentage of your weekly paycheck and place it into a special account that uses stocks to increase the balance by earning interest and gains. The government sets a limit on how much money you can invest in a 401K plan every year. In 2007, the limit is $15,500 per year. After the age of 50, you can contribute an additional $5,000 without penalty. Your employer is allowed to contribute 100% of what you contribute without penalty.
IRA (Individual Retirement Account)
There are two types of IRAs. A regular IRA came into play in the 1980s. This type of IRA allows you to set aside $4,000 per year tax free. Those fifty or older can contribute $5,000 per year.
A Roth IRA is different. You must pay income taxes on it during the years that you contribute to the IRA. When it comes time to cash the Roth IRA in after retirement, you then receive the money tax-free. The same contribution limits apply. You cannot cash a Roth IRA in until you are almost 60.
Social Security
One of the problems with social security is that serious debate has been occurring over whether there is enough money going into the program to pay everyone what they have contributed over the years. Currently (2007), those who are of retirement age receive close to $1,000 a month minus taxes. By the time those in their 30s reach retirement age, it is estimated that the government will only have enough money in the social security program to pay upwards of 80% of the current amount. So, those who still have a few decades to go before they reach retirement age will most likely receive no more than $800 minus taxes. There is no way people can live on this meager amount.
It is essential to start building a retirement income now. Based on statistics, someone who is earning $40,000 at the age of thirty, has a 401k plan currently valued at $10,000 and is contributing $200 per month will only be able to stay out of debt for one year. It is essential to play ahead now!
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toledo
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I was born in Toledo, but have been living in Austin for the past 12 years.
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