AS TRADITIONAL PENSIONS have disappeared, many workers expect to rely heavily on a 401(k) as their primary source of income in retirement. But not everyone has access to an employer-sponsored plan. Roughly 30% of employers—most often small businesses— don’t offer retirement benefits to employees, according to the Transamerica Center for Retirement Studies. And those who are self-employed are also on their own when it comes to saving for retirement.
If you’re in one of these groups, you have options. And, just as it is for people with employer-offered plans, the sooner you start saving, the better positioned you’ll be when you retire.
Individual retirement accounts, or IRAs, were established by the Employee Retirement Income Security Act of 1974. The law allows you to funnel money into a tax-deferred account held at a brokerage firm or bank. If your employer doesn’t offer a retirement plan, or you work for yourself, contributions are tax-deductible. You have a slew of options for investing the money in the account, including stocks, bonds, mutual funds, exchange-traded funds and other investments that fit your long-term goals.
You have until April 15, 2020, to set up and fund an IRA for 2019. Workers younger than age 50 who don’t have a retirement can sock away up to $6,000; those who are 50 and older can put away an additional $1,000 in catch-up contributions, for a total of $7,000. (The maximum contribution is the same for 2020.) You cannot contribute more than you earn, however. So, for example, if you made $5,000 working part-time in 2019, your contribution limit is $5,000.
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