Americans have the attention spans of gnats. This unfortunate fact can really hurt you when it comes to finances. Simply put, you need to plan for the future...today!
The government knows your coming. And it is terrified! The simple fact is there is a bulge in our population. The bulge is known as the baby boomer generation. There are far more baby boomers than there are younger people. This would not be a problem except for the fact that a good percentage of baby boomers have not saved adequately for their retirement. This means the government is going to have to foot the bill, and that is an iffy proposition since there will be a smaller group of taxpayers [the young] trying to foot said bill.
In an effort to address this problem, the government has been passing all kinds of laws designed to get us all to save money. It is no secret that social security is not going to be able to handle the problem. So, what's the solution? The government hopes it is the tax advantage retirement account. Simply put, these are some of the best and simplest ways to save for the future.
The most basic of retirement accounts have been around forever. Yep, the good old pension fund. Pension plans are often offered by large corporations and they were a good choice for a long time. As we have seen in the last 15 years or so, that is no longer the case. Most people don't stay at a job long enough to get the biggest benefit. Also, we live in an age where big, bad corporations are no longer impervious to going bankrupt. One needs only consider Enron and the current problems at GM. All and all, the pension plan is much like the horse and buggy - a good idea whose time has passed.
401(k) plans are the big retirement plan these days. The advantage of the plan is you can stuff fairly large amounts into them with pre-tax dollars. They are also more flexible in that you can roll the money over to another retirement plan if you leave the company in question. Even better, your employer has the right to stuff away pre-tax dollars as well, but must match your contribution in some manner. Over time, this combination of factors can turn a 401(k) into a major nest egg of funds.
The Individual Retirement Account, or IRA, is another goodie offered up by a nervous government. It works similar to the 401(k), but you do not have to be working for a company. You can set it up yourself through a broker. The major downside of the IRA is the contribution limit. Simply put, you can't put all that much in. The amount changes from year to year, but is currently $4,000 in 2007. Still, that represents a lot more in savings than most Americans will make on their own.
If you are in the work force, you need to be thinking about your future. Retiring may seem a long way off, but the planning you do now will help make retirement comfortable and relaxing.
Learn more about financial planning at UFCAmerica.com.
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