There are many ways to prepare for retirement. Most experts say that to maintain the
same standard of living, your retirement income should be about 80% of your final
Two common ways to save for retirement are a 401(K) and an IRA. You can have both of these accounts. These are tax deferred accounts. This means that you only pay taxes on what you withdraw after retirement. Since your income often drops after you retire, you move down to a lower tax bracket and will be taxed at a lower rate for your money than you would have been while fully employed. However, if you want to take money out of your 401(k), 403(b), or other retirement account before you’re 59-and-a-half, you will have to pay a 10% penalty.
Oftentimes, employers will match contributions to a 401(K). This is called employer
matching. For employees to receive money from their employer, the employee must first make
a contribution. The employer will then match that contribution up to a certain limit.
Workers who have paid into Social Security are eligible to receive benefits when they
retire, meaning they will receive money from the government every month. The amount they
receive depends on their average earnings when they were working.
There are other sources of income in retirement as well, like pension plans from
employers, or annuities, which pay out a fixed sum of money over time.
Commonly, people will invest money for retirement. This is a good idea because the
stock market will compound money, meaning that it will allow money to grow large if allowed to
sit for a long time.