Saving for retirement requires only four easy steps. Here are the four steps to save for retirement:
- Choose a retirement account.
- Open a retirement account.
- Put money in your retirement account.
- Invest the money in your retirement account.
How to Save For Retirement Step 1: Choose a retirement account
You have many account options for retirement saving. Anyone who works can contribute to a regular IRA. Except for high earners, all employees can also contribute to a Roth IRA. Furthermore, many employees are eligible for a 401(k) through their for-profit employer. (State workers may qualify for a 457 plan, while those working at non-profits might have access to a 403(b) plan).
If you're self-employed, you'll have a slew of additional self-employed retirement plan accounts to choose from, including a SEP-IRA, a SIMPLE IRA, and a Keogh plan.
How to Save For Retirement Step 2: Open a retirement account
Opening a retirement account is almost as easy as opening a bank account. Just fill out some forms and you're on your way. Here is some information to have on hand when you create your account, either online or in person:
- Your social security number
- Your name, address, and other contact information
- An estimate of your net worth and annual income
- Your beneficiary's name, address, and social security number
How to Save For Retirement Step 3: Put money in your retirement account
Now that you have a place to put money you want to save for retirement, you next must actually put the money in there. In the case of an IRA, this can be done by writing a check or setting up an automatic transfer into your retirement account. Make the check out to the name of your custodian, for the benefit of your IRA. For example, write the check to "Bank X Corp, for the benefit of John Smith's IRA Account # 111-222."
How to Save For Retirement Step 4: Invest the money in your retirement account
Congratulations, you've decided what retirement account to set up. You've also opened your retirement account and put money into it. Said another way, you've "funded your retirement account." But note: you haven't invested the money yet. It's still in "cash." The fourth and final step is to determine how to invest the money you have saved. You have many retirement plan investing options, including:
