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Saving for retirement may seem like something you don't need to be concerned with right now. However, many people underestimate the amount of money they should save and don't start soon enough. Read on to learn different ways to build your retirement nest egg.
Many employers offer a savings program called a 401K. When you sign up for that plan, money is taken out of your paycheck and deposited into your retirement account. This option is better than simply putting the same amount into your personal savings account because this money is taken out pre-tax. By doing this, you lower the amount of tax you owe with your paycheck and only pay tax when you withdraw funds from the account. Another advantage is that some employers offer a matching option. When an employer matches your contribution, they are adding money directly to your account in addition to the amount you are depositing. In essence, this is free retirement money. If you change jobs, you may be able to roll the existing account into your new one. To find out more about this option, reach out to a financial advisor like Harvey Bell, so you don't miss out on this fantastic saving plan.
When you purchase a home, you get the advantage of having a long-term investment. During the years you work, you are paying down your home loan while the value of your property increases. By the time you get to retirement, you could have a lot of equity in your home. You can use this equity in two ways. You can downsize and sell your home to use the cash for your everyday spending. The second option is to remain in your home and use a home equity line of credit. This credit is based on the equity in your home and is available like a credit card. You repay this money in small amounts and only pay interest on the amount you use. This option is nice if the real estate market is slow or other investment options aren't paying out as high as you'd like. When the market changes, you can then sell your home at a higher rate or continue to use the line of credit as needed.
An HSA is another plan offered by some employers. If your company participates in a high deductible health insurance option, you can also open this savings account. Like the 401K, money is withdrawn pre-tax from your paycheck and automatically put into the account. This money is set aside for all types of medical expenses, both current and future. The money never expires, so you can continue contributing to it long-term. When you use the funds, you are not taxed when the money is removed from the account. Essentially, this means that all your eligible health expenses are paid for with money that is never taxed. Though you don't earn interest on this investment, the lack of tax payment may be more than the amount of interest you would have earned.
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