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Recession tips: When to start saving for retirement?
One of the questions that comes up often during the ongoing recession, is whether now is a
good time to start saving for retirement. Given the budget pressure on many households, it
is no wonder that many try to postpone saving for retirement for now. Here are a couple of
things to consider when making your decision on retirement during this recession:
1. Ideally, you want to start saving for retirement as soon as you can. This of course has
different implications for different people. Some may be able to start saving for retirement
right out of high school, others after college, and still others after grad school or other
professional schools or at some point during their career.
But the basic rule is that the sooner you start the better. The money you save for your
retirement compounds over time (each year’s interest generates its own interest in the
following years) and the longer the time to your retirement, the more you will have when
you finally retire.
2. Making decision about whether now is the right time to start saving for retirement very
much depends on your conditions. And with the ongoing recession, many may rightfully
feel that this is simply not the right time. Obviously, if you are an employee, usually your
employer contributes to your retirement account.
Whether you want to make further individual contributions or not of course depends on
your specific situation. Ideally, of course, you don’t want to postpone making contributions
simply because of the ongoing recession.
3. In terms of where to save your money, the general consensus is that tax-favored
retirement accounts such as IRA and 401(k) accounts are the most convenient places to
save your money. The major advantage they provide is that the allow you to defer paying
taxes on the money you save. In other words, you do not pay taxes until you decide to
withdraw your money, often years later. For further information on, see IRA, 401(k)
As alway, before making your decision talk to an objective professional advisor.
One of the questions that comes up often during the ongoing recession, is whether now is a
good time to start saving for retirement. Given the budget pressure on many households, it
is no wonder that many try to postpone saving for retirement for now. Here are a couple of
things to consider when making your decision on retirement during this recession:
1. Ideally, you want to start saving for retirement as soon as you can. This of course has
different implications for different people. Some may be able to start saving for retirement
right out of high school, others after college, and still others after grad school or other
professional schools or at some point during their career.
But the basic rule is that the sooner you start the better. The money you save for your
retirement compounds over time (each year’s interest generates its own interest in the
following years) and the longer the time to your retirement, the more you will have when
you finally retire.
2. Making decision about whether now is the right time to start saving for retirement very
much depends on your conditions. And with the ongoing recession, many may rightfully
feel that this is simply not the right time. Obviously, if you are an employee, usually your
employer contributes to your retirement account.
Whether you want to make further individual contributions or not of course depends on
your specific situation. Ideally, of course, you don’t want to postpone making contributions
simply because of the ongoing recession.
3. In terms of where to save your money, the general consensus is that tax-favored
retirement accounts such as IRA and 401(k) accounts are the most convenient places to
save your money. The major advantage they provide is that the allow you to defer paying
taxes on the money you save. In other words, you do not pay taxes until you decide to
withdraw your money, often years later. For further information on, see IRA, 401(k)
As alway, before making your decision talk to an objective professional advisor.
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