Establish a Consistent Saving Habit One of the easiest ways to establish a savings habit is to participate in your employer’s 401(k) plan. Funds are withheld from each paycheck and deposited into your account. In addition, if your employer matches part of your contribution, you accumulate even more. A second way to consistently save is with an automatic savings transfer program with your financial institution. You decide how much and when you want funds transferred from your checking account into a savings account. You can also use a payroll deduction plan from your employer and get the same results. Saving Smart Along with how much and how often you save, what you earn on your funds will determine how fast your money grows. You can not control what happens with interest rates or the stock market, but you can consider different types of savings vehicles that provide different returns. The simplest of these is to consider buying certificates of deposit (CDs) instead leaving funds in a savings account. CDs usually offer higher interest rates, but they are time deposits and have penalties for early withdrawal. If you can accept not having immediate access to your funds, CDs can be an attractive savings vehicle. A final smart saving idea is to use a regular IRA. You can establish a regular IRA regardless of your income and regardless of whether you are eligible to participate in your employer’s qualified retirement plan. For 2010, you can contribute up to $5000 or $6000 if you are 50 or older. One of the benefits of IRAs is that earnings within the IRA are tax deferred. This has the effect of increasing your earnings. You delay paying taxes until you withdraw the funds and there is a penalty if you withdraw the funds before you reach the age of 59 ½.
Posted on: Fri, 14 Mar 2014 03:18:48 +0000
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