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According to a recent survey, what percentage of people age 22-32 claim to have no savings for retirement?
In just a minute, I’ll show you the answer.
So, here you are. You've landed the great job that you always wanted. Your career is underway, and you're finally starting to earn the kind of money you were hoping to.
If you're like me, it's pretty tempting to go out and start getting the things you've been dreaming about - a new car, clothes, maybe the new tablet that just came out, and a retirement account?
I know - you're too young to think about that, right? Well, maybe not. I mean, sure, there are a lot of things to do before you stop working, like paying off your student loans, for example. But if you start saving now, things could be a whole lot easier down the road.
One easy step you could take is to open an IRA. This would allow you to start putting some money away, and have it grow, tax deferred. And that tax-deferred growth can really add up over time.
Here's how: if you deposited $5,500 in an IRA at age 30, then deposited the same amount every year for 30 years. Assuming a 6% return and a 25% tax bracket, your money would grow to over $460,000 in those three decades - versus about $350,000 in a taxable account.
That $110,000 dollar difference makes for a pretty different kind of retirement - even after accounting for taxes you may pay on that money when you withdraw it.
So you've seen the difference tax-deferred earnings in an IRA can make over the long haul. Now you need to consider which IRA is best for you. There are two kinds - the Traditional IRA and the Roth IRA.
In a Traditional IRA, your contributions may be deductible on your tax return and you'll generally pay taxes when you make withdrawals in retirement. With a Roth IRA, you make contributions with money you've already paid taxes on (after tax) so withdrawals are tax-free in retirement, provided that certain conditions are met.
The amount of money you can contribute to either type of IRA is $5500 per year - and you can split your contribution between the two - but the combined total can't be more than the annual limit. There are also a few other rules you'll need to know about these IRAs, so it's always a good idea to have a conversation with a financial professional to get the details that will will help you decide which account is the best fit for you.
Ask friends and family members for ideas on who they'd recommend to give this kind of advice. And here's the real irony - the start of your career is really the best time to start preparing for the end of it. Regardless of which IRA you choose, if you start putting away money now - even a little bit, the power of tax deferred growth and compounding interest will help you to live the kind of retirement you'd like down the road.
So, what percentage of people aged 22-32 claim to have no savings for retirement? The answer is
B: 51% of people 22-32 claim to have nothing saved for retirement.
Find out with My Retirement Plan, an online tool that makes it easy to see if you are on track. After you answer a few questions, My Retirement Plan will calculate your retirement savings goal and recommend personalized next steps.
Traditional IRA distributions are taxed as ordinary income. Qualified Roth IRA distributions are not subject to state and local taxation in most states. Qualified Roth IRA distributions are also federally tax-free provided a Roth account has been open for at least five years and the owner has reached age 59 ½ or meet other requirements. Both may be subject to a 10% Federal tax penalty if distributions are taken prior to age 59½. Wells Fargo Advisors is not a legal or tax advisor.
Please keep in mind that rolling over assets to an IRA is just one of multiple options for your retirement plan. Each of the following options are different and may have distinct advantages and disadvantages.
When considering rolling over assets from an employer plan to an IRA, factors that should be considered and compared between the employer plan and the IRA include fees and expenses, services offered, investment options, when penalty free withdrawals are available, treatment of employer stock, when required minimum distribution begin and protection of assets from creditors and bankruptcy. Investing and maintaining assets in an IRA will generally involve higher costs than those associated with employer-sponsored retirement plans. You should consult with the plan administrator and a professional tax advisor before making any decisions regarding your retirement assets.
Wells Fargo Advisors is the trade name used by two separate registered broker-dealers: Wells Fargo Advisors, LLC and Wells Fargo Advisors Financial Network, LLC, Members SIPC, non-bank affiliates of Wells Fargo & Company. Wells Fargo Bank, N.A. is a banking affiliate of Wells Fargo & Company.
This video has been prepared for informational purposes only and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. The accuracy and completeness of this information is not guaranteed and is subject to change. Since each investor’s situation is unique you need to review your specific investment objectives, risk tolerance and liquidity needs with your financial professional(s) before a suitable investment strategy can be selected. Also, since Wells Fargo Advisors does not provide tax or legal advice, investors need to consult with their own tax and legal advisors before taking any action that may have tax or legal consequences.