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Being broke in retirement is your fault

We live a short life in today's world, always looking for the following toy to buy or planning the next vacation and spending little to no time planning the most important part of our lives. We often pretend that day would never come, and we sometimes refer to it as the R-word. We see people go through this process daily and never talk about it enough. It affects millions of people every day and is probably having in your family now. The scary word is retirement. Unfortunately, most of you reading will retire with little to no money to continue your daily activities. Although I'm here to say we can change that starting today. All we need is a few dollars, the more, the merrier, and you would be able to retire with no worries.



Let's first break down what exactly does it meant to retire. Most associate the word with the older generation. "It's the part when you're too old to work and have money saved up" - random person when asked. The definition given is primarily correct as it means to permanently no longer work. Although we still need shelter to live in, food to eat, and to have clothes on our backs. So that leaves the question, where do I get money to cover those expenses? While some may argue they have social security to fall back on. There is always talk about the government using those funds to protect its budget. So if you trust the government enough to have your money from social security, the next question that should follow is, is it enough? Probably not, which means we need to set ourselves up for success while looking at our future.


So what can we do to help prepare for the inevitable to come? The first is we open a 401K and or a Roth IRA. From this point forward, everything that happens between now and your retirement is entirely your fault—the day when we could play as ignorance as our older folks have long passed. With the rise of the internet and smartphones, we have an unlimited amount of information. All we need is just a tiny desire to learn.



While there are more methods to help in retirement, I will mainly cover the two main accounts and their differences to encourage others to Do The Impossible. A 401K account is funded from your check before seeing any taxes; usually, this happens behind closed doors. A Roth IRA account is where you put money that Uncle Sam has already been taxed. 401K accounts get taxed regardless of the age you withdraw the money. The critical difference is how much you'll pay in taxes. If you begin drawing at the age of 59 and a half, you will face the least amount of taxes. A Roth IRA only gets taxed if you make profits and attempt to pull them before the age of 59 and a half. People can remove any contributions made in a Roth IRA without any penalty, the only catch being those contributions still count towards your $6,000 yearly limits set by the IRS. A 401k also has an annual limit of $19,500 or $26,000 if you are over 50.


A common strategy to make the most of these programs, if you make a lot of money or pay a lot in taxes, is to focus on the 401k account. The idea is that you are likely to make less money when you retire, while your 401K account has several commas. When it comes to taxes, increasing your 401K contributions lowers your tax bracket. Helping you put more money in either your pocket or retirement. It is also best to always max any match contributions offered by your company. Your company is giving you free money for your retirement.



In addition, if you are likely making less money maxing the Roth IRA is the best strategy. The goal being when you are older, you will make a lot more money and get hit harder with taxes. Finally, a Roth IRA is perhaps the most significant open-source secret in the United States. Any money earned in that account is tax-free when you are eligible for retirement at 59 and a half. There are articles of people taking advantage of these tax loops to avoid paying substantial tax bills.


Regardless of whether you invest in a Roth IRA or 401K, the most crucial part of your journey is just to get started. By reading this article, you are not only more informed than most people, but you now have control of your retirement. The R-word is no longer a scary word to use around, as you are equipped with knowledge. Your next step in your journey is to learn what to invest in and what kind of trader you will be. I will have an article covering that information in the next posting.

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