Time is Not on Your Side When it Comes to Savings

The sooner you start saving for retirement the better. Someone who starts saving say $100 a month for retirement at age 20 will be further ahead then someone who saves $200 a month at age 40.

Both my wife and my own retirement and savings accounts have been raided the past few years from our many financial mistakes and the never ending recession and since time is not on your side when starting late on building your retirement fund I am eager to get the accounts replenished.

Now don't get me wrong, but it is never too late to start saving for retirement no matter how old you are. With us however, we are currently on Dave Ramsey's baby step 2, which is pay off all your debt using the debt snowball, and us returning to a savings plan needs to come after we pay off all our debts and have a fully funded emergency fund. When you have no debts and a fully funded emergency fund to work with, you will be able save for retirement much easier.

When you are ready start baby step 4 and build your retirement nest egg you will find many investment options to choose from. Some of the most common are:

Traditional IRAs
Roth IRAs
401(k)s
403(b)s
SEPPs

Each of these mediums have limits to them such as, the amount you can deposit to each them every year, the amount you can withdrawal from them, and the amount you can make in order to use them.

As I said early it is never too late to start saving for retirement. If you are starting late, you will just have to be more diligent about investing.

If you are pushing 60 and have no debt then you need to make saving for retirement your first priority. You probably won't be able to retire at 65, but you can have a pretty descent retirement fund built up in no time if you really work at it. But remember you need to make sure you are debt free and have 3 to 6 months of expenses in an emergency fund.

Even if you are in your forties, and you and your spouse fully fund your Roth IRAs every year, you can potentially have a $1 million tax free so you can retire at 65.

If you are a business owner like me a SEPP (Simplified Employee Pension Plan) can be an excellent way for a small business owner to save 15 percent of income each year. The other plus to this is the money that is put in these accounts is tax deductible. If you make less than $150,000 a year, it is possible to max out an Roth IRA first and it is tax free to boot. After that contribute to the SEPP.

Like I was saying a Roth IRA is completely tax free. It doesn't matter if you save millions in a Roth the money is all yours. If you save the same amount in a 401(k) it will end up costing you about a quarter of the saved amount in taxes. In the long run the Roth is best way to go, but if your employer offers a company match then the 401(k) is the way to go.

Remember there is no best way to get rich quick. You need to get rich slowly. Perseverance wins when it comes to building wealth. True wealth building takes time. Unfortunately, time is not on your side. Get started as soon as you're debt free. Otherwise, I hear dog food is cheaper than human food. Yum!

[This post is written and copyrighted by Financial Elite (http://financialelite.blogspot.com/ ).]

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