June 3, 2011. Bill Szydlowski
credit: dcbprimeIf you wish to know just how much you need to save for your retirement, then you will probably want to make a few personal assessments such as the type of lifestyle that you are used to and your own retirement wishes. Generally, experts like to make calculations based on the income earning capacity of the individual.
This is an excellent gauge because the standard of living of the income-earner generally coincides with his current earning capacity. In making savings for your retirement, a good rule to follow is: the higher your current income, the higher the percentage that you should save for your nest egg. This because of two compelling reasons: first, you will be able to make lower contributions later on if you start accumulating a large amount of reserve funds early on for your retirement, secondly, this will allow you to prepare for any contingencies in case you have a lower earning capacity later on due to changes in the economy and other factors.
Playing around with retirement investments is a risky business. This is why you should make sure that you know what you are doing before you make any rash decisions. There are many types of retirement accounts for the standard income earner to choose from. One of the easiest forms of retirement investments that you can put your money into is a Roth IRA. Under the Roth IRA rules, you will be able to make withdrawals on the direct contributions to your account tax-free and penalty-free as long as you comply with certain requirements such as the 5-year seasoning period. Although just like other retirement accounts, there is a Roth IRA withdrawal penalty of 10%, it is easier to avert this penalty with the number of exceptions available under the Roth IRA system. Furthermore, as a financial package, a Roth IRA can be managed entirely by the financial institution with fixed annual money growth on the part of the investor.
Updated June 3, 2011. Published May 15, 2011. Bill Szydlowski
