Financial Planning for Retirement, Get A Jump Start In 2016 On Your Financial Goals

The earlier you begin planning for your retirement, naturally the more money you will have when you retire, and the less money you can put away each pay period to reach your retirement goals. Sadly, you can’t rely on Social Security to be able to completely support you anymore. So it is necessary to invest extra money while you are still working so that you can retire and maintain at least close to the same lifestyle you are used to.

If you are one of those lucky people who work for a company which still offers a pension, that’s a great addition to your Social Security when you retire. Pensions typically are “vested” after ten years, which means even if you leave the company after that time, you are still entitled to the pension you earned while you worked there. If you continue to work for the company (which is mostly government and union jobs), then the longer you work after your pension is vested, the more the company contributes to your pension, so when you retire, your pension payment will increase as opposed to if you left the company after just ten years.

Another thing many large companies offer now in lieu of pensions are 401K plans.
This is a type of tax free savings where money is taken from your paycheck prior to taxes being taken out and the company usually also contributes a percentage based on what you contribute each pay period. The benefit of a 401K plan is that no matter how long you work for the company, whatever you put into and earned while you worked for that company is yours and will follow you to your next job. The caveat with that is that you have a certain amount of time to either transfer it to the 401K at your new job, or put it into some other type of tax free retirement fund, or you will pay a stiff penalty, plus all the taxes that you would have paid on the money had it not been put into that account.

Some companies offer stock options and depending on the company you work for, this could be a very wise investment. You determine how much money is taken out of your paycheck each pay period and put towards company stock, and stock shares are purchased using the money you have taken out. This is not a tax free way of saving, so you will have to claim it on your return at the end of each year as income. Also, with stock options, each year you earn dividends on your stocks, and you have the choice of either withdrawing the dividends or rolling them into more stock. Obviously, if you are using this as a type of retirement plan, you want to roll those dividends into more stock for when you retire. Then when you retire, depending on the value of the stocks and what other things you have done saving for retirement, you can simply take the dividends each year, or you can cash the stock in. Obviously, if you can allow the stock to keep earning for you, you will have a nest egg that you can access in case of emergency.

Stay tuned to for financial advice, debt reduction and money saving advice for 2016 and beyond.