Saving for retirement information? On a bad credit site? Trust us — it makes sense. If you want to get out of debt, that’s definitely a noble goal. However, one thing that we have personally noticed is that a lot of people end up finding themselves without any ability to save for retirement. They don’t know where to being, they’re too embarrassed to ask, and they live in fear of everything falling apart. Don’t worry about that — if you get out of debt, you need to focus on the next adventure. Yes, it’s scary but you’re in good company. There’s no reason to assume that you have to go through this process all on your own, of course!
There are two types of retirement accounts that get discussed quite often — traditional IRAs and Roth IRA’s. We’ll cover traditional IRAs first.
This is a tax deferred account that allows you to use pre-tax dollars and then pay taxes on the growth later, when you are hopefully in a lower tax bracket. However, people end up paying more in terms of taxes because they end up taking money out of the retirement account while they’re still working. This ends up costing you more in terms of taxes later.
However, what if you could avoid being hit with so many taxes? That’s actually where the Roth IRA comes in. These are going to be ones that are funded with post-tax dollars. You are taxed upfront and your money is withdrawn tax free.
You have to think about what type of tax bracket you’re going to be in at retirement versus what you’re in right now. If you’re going to end up socking away a lot of money in qualified accounts that are not taxed upfront, then you’re going to end up wanting to go with a Roth IRA anyway — the money is taxed upfront at your lower rate. And then you can withdraw the money tax free when it’s time to retire.
What if you flip it backwards, though? If you plan on living on less income when you retire and would then therefore be in a lower tax bracket, you’re going to need to do a traditional IRA where you would have the lower rate and the tax-free growth.
A Roth IRA tends to really have a much better benefit system than a traditional IRA. Even though you might be far away from retirement, we advise that you at least look at your options now. Thinking about retirement means that you’re going to be able to really ensure that you will have no problem taking time off when the time is truly right. It doesn’t really have to be a struggle, you know! Good luck!