So far we have discussed the importance of saving money and paying down and managing Credit7s as important parts of building a strong Credit0 fortress. These first two stages are critical in allowing the average family to survive difficult economic times, like we are currently facing. The next important step is to focus on your retirement savings.
As they say, nothing is sure but death and taxes. However, I feel I can say with certainty, that we would all like to add a comfortable retirement to that list. Unless you wish to work until you drop, like people did in the early stages of the industrial revolution (before unions created minimum working standards), you will need to save a great deal of money for your retirement. As I discussed in my article "Fix The Cracks In That Nest Egg", the first step in preparing for your retirement is to fund your 401k to maximize the matching contributions your employer will make. If you employer offers a matching fund, as most do, make sure you are getting as much of that money as you can. Do not leave that money on the table. Think of it like a raise that you are guaranteed to get.
Once you have funded your 401k, you should open, and fund an IRA (Individual Retirement Account). There are many types of IRA's available, and you should certainly consult a CPA or Investment Professional if you have questions. However, I personally have, and recommend the ROTH IRA. Without going into all of the differences, (there are too many to list here) I like ROTH IRA's for a couple of reasons. Contributions to a ROTH can be taken back out (if needed) tax-free. So, if you contribute $5000 per year for 4 years, and then suddenly are laid off, you can take out that $20,000 to help you get by until you find new employment. This is powerful protection against difficult economic times. You can also take contributions out for the purchase of a first home. (It is important to leave your contributions in the ROTH unless you have a Credit0 emergency or are buying a home.) Another benefit of ROTH IRA's is that they grow tax-free. So if you contribute $150,000 over 30 years, and you manage to grow those funds to $1.5 million dollars through your investing prowess, you can take out all of that profit (at retirement) without paying any taxes. Nice, huh?
Between your 401K, Social Security, and your IRA's, you should have a good amount of money saved up for retirement. One important note for parents: If you are choosing whether to fund your retirement accounts or to save for your child's college education, always put your retirement savings first. If necessary, your children can borrow money for college. You will not be able to borrow money for your retirement. So, unless you really like cat food, pay your retirement first.
By funding your retirement, and preparing for your future, you are building protection for your later years, and at the same time you are building another source of funds that you could use in a Credit0 emergency. I truly believe that the foreclosure crisis could have been largely avoided if people had followed the three Credit0 fortress defenses we have discussed so far. By building a savings fund, eliminating Credit7, and planning for retirement, most families would have had more than enough funds to survive on while looking for work or facing the Credit0 hardships that so many have faced in this crisis. We can't change the past, but we can plan for a better future.
We will continue building our Credit0 fortresses in future articles.
So far we have discussed the importance of saving money and paying down and managing Credit7s as important parts of building a strong Credit0 fortress. These first two stages are critical in allowing the average family to survive difficult economic times, like we are currently facing. The next important step is to focus on your retirement savings.
As they say, nothing is sure but death and taxes. However, I feel I can say with certainty, that we would all like to add a comfortable retirement to that list. Unless you wish to work until you drop, like people did in the early stages of the industrial revolution (before unions created minimum working standards), you will need to save a great deal of money for your retirement. As I discussed in my article "Fix The Cracks In That Nest Egg", the first step in preparing for your retirement is to fund your 401k to maximize the matching contributions your employer will make. If you employer offers a matching fund, as most do, make sure you are getting as much of that money as you can. Do not leave that money on the table. Think of it like a raise that you are guaranteed to get.
Once you have funded your 401k, you should open, and fund an IRA (Individual Retirement Account). There are many types of IRA's available, and you should certainly consult a CPA or Investment Professional if you have questions. However, I personally have, and recommend the ROTH IRA. Without going into all of the differences, (there are too many to list here) I like ROTH IRA's for a couple of reasons. Contributions to a ROTH can be taken back out (if needed) tax-free. So, if you contribute $5000 per year for 4 years, and then suddenly are laid off, you can take out that $20,000 to help you get by until you find new employment. This is powerful protection against difficult economic times. You can also take contributions out for the purchase of a first home. (It is important to leave your contributions in the ROTH unless you have a Credit0 emergency or are buying a home.) Another benefit of ROTH IRA's is that they grow tax-free. So if you contribute $150,000 over 30 years, and you manage to grow those funds to $1.5 million dollars through your investing prowess, you can take out all of that profit (at retirement) without paying any taxes. Nice, huh?
Between your 401K, Social Security, and your IRA's, you should have a good amount of money saved up for retirement. One important note for parents: If you are choosing whether to fund your retirement accounts or to save for your child's college education, always put your retirement savings first. If necessary, your children can borrow money for college. You will not be able to borrow money for your retirement. So, unless you really like cat food, pay your retirement first.
By funding your retirement, and preparing for your future, you are building protection for your later years, and at the same time you are building another source of funds that you could use in a Credit0 emergency. I truly believe that the foreclosure crisis could have been largely avoided if people had followed the three Credit0 fortress defenses we have discussed so far. By building a savings fund, eliminating Credit7, and planning for retirement, most families would have had more than enough funds to survive on while looking for work or facing the Credit0 hardships that so many have faced in this crisis. We can't change the past, but we can plan for a better future.
We will continue building our Credit0 fortresses in future articles.
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