Are you planning for the future?
While retirement may seem like it's a long way off, saving for your later years “has to come first,” stresses Liz Weston, a nationally syndicated personal finance columnist and author.
“You are so much better in the long run if you make this [saving for retirement] a top priority and keep your mitts off of it,” Weston told LifeLock in an interview Friday.
People with retirement savings plans often get tax breaks, Weston said, allowing them to defer paying taxes on some of the money that's put into those plans.
An Individual Retirement Account, or IRA, lets people put away themselves for retirement. A 401(k) and similar accounts are known as workplace savings plans and are offered by employers. Employees decide whether to contribute a part of each paycheck before taxes are taken out.
Forty-four percent of all U.S. private businesses offer such plans, according to a March 2013 report by the U.S. Bureau of Labor Statistics. Some companies offer to match what an employee sets aside for a 401(k) account, usually up to a certain amount or percentage.
But even if your workplace doesn’t have a matching program, you should still invest in a 401(k) if it’s an option, Weston said.
"It is all the power of the future compounded: $1,000 now is going to one day be $10,000 and then $30,000," she said, adding that she realizes it is harder for people in debt to realize the importance of saving for retirement and make it a priority.
About 51 million Americans have invested an estimated $3.5 trillion in 401(k) plans, according to the Investment Company Institute. The organization says total U.S. retirement assets were $23 trillion as of Dec. 31, 2013, up 5 percent from $21.9 trillion on Sept. 30, 2013, and up 15.6 percent from year-end 2012.
Retirement savings accounted for 34 percent of all household financial assets in the United States at the end of the fourth quarter of 2013, according to the Institute.
Dan Solin, director of investor advocacy for the BAM Alliance and a wealth advisor with Buckingham Asset Management, offers ways to make the most out of your retirement savings plans in an article published this week.