BATON ROUGE, La. (WAFB) - Research shows that before the pandemic, about 85 percent of Americans had some form of savings for retirement.
But due to financial strains this past year one survey found 27 percent of people stopped saving, or saved less money.
With more companies now hiring, and more people finding jobs, many Americans are able to start thinking about saving for retirement again.
CBS News Business Analyst Jill Schlesinger said you have quite a few options when it comes to saving for retirement.
Her key advice is to start small.
“When I mean start small, if you work for a company you could put just one percent of your pay into the retirement plan. This may actually work out to be 20 or 25 bucks per pay period but you start there. And what’s really great is that some plans allow you to automatically increase it to see how it goes,” she said.
What if you are self-employed or work for a small business?
“If you don’t work for a big company that doesn’t have a retirement plan you can start a IRA and you can [put] up to $6,000 in an IRA, $7,000 if you’re over 50 and you could start really small,” Schlesinger said. “Most of the investment companies out there allow you to use small dollars to fund these plans. Do something. Start small. Go slowly.”
If you’ve heard about an IRA or Roth IRA plan but you’re not exactly sure how they work Schlesinger says basically a major difference between these two plans is when you get a tax benefit.
If you use an IRA you get the tax benefit today.
You save money for the rest of your career and when you’re 59 1/2 years old you can access that money.
When you take it out later it gets taxed.
Whereas with a traditional Roth IRA you do not get any tax benefit now but rather, later when you take the money out.
No taxes are due then.
It boils down to what you want and is easiest for you.
Here’s another component to retirement savings - and just savings in general - you should think about especially if you find yourself with a bit of extra money right now.
“What we know is that when people put money into their retirement we want that tax benefit to accrue to them. If you have to go into that account because there’s an emergency and pull the money out before you’re age 59 1/2 you could be subject to a penalty and you have to pay taxes,” she explained. “Now in terms of how much, here’s the really good news of the pandemic - the savings rate has gone sky high. It’s amazing to see and what we are hoping for is people use the experience of having a little extra money, maybe it’s a tax refund, maybe it’s a stimulus check, you’re trying to get six to 12 months of your living expenses in an account that is accessible to you. I know that’s hard to do but I really think it’s important. We really learned that lesson last year.”
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