Retirement Planning

Retirement? What?? No, I'm not an old lady, and I didn't just fall off my rocker. I know you're young, and fabulous, and would much rather focus on the here and now versus the golden oldies. Or maybe you think that saving for your kids' college funds is more important. Well, unfortunately, your gray-haired future is looking kinda bleak right now: Social Security (you know, that money deducted from your paychecks that you're supposed to get back when you retire?) is scheduled to dry up by the year 2037! See, back in 1935, when the government set the age of retirement at 65, the life expectancy was, well, 65! Now, we're living a few decades longer than that! It doesn't take a math genius to figure out that we parents need to be a little more proactive than our own parents or grandparents were about our own retirement.

I know, I know: The idea of funding your retirement can seem daunting at first, but it's really pretty simple. Once you understand the different plans available, you can choose the one that fits your income and lifestyle and start building that nest egg. Here are the different retirement funds to choose from:

• 401K: An employee retirement savings and investing plan that allows full-time employees of participating employers to set aside anywhere from 1 to 6 percent of their pre-tax income into an investment account.
  
  
• Traditional IRA: IRA stands for individual retirement account. A traditional IRA lets you contribute up to $5,000 a year (for a single tax filer, as of 2009), and what you earn is tax-deferred until you withdraw it. Also, whatever you invest in an IRA each year—up to the max amount allowed—may be tax-deductible as well. An IRA is only available for people under 70 1/2 who earn a living, no matter how much or how little.
  
  
• Roth IRA: Roth's are set up specifically for people who earn below $95,000 as a single or $150,000 married, filing jointly. Also, what you contribute to a Roth comes from after-tax income and is not tax-deductible. However, you can withdraw from this account at any time, without any penalties.
  
  
• SEP-IRA: If you work for yourself, you get your own pre-tax, tax-deferred plan called a simplified employee pension IRA. You contribute a percentage of your pre-tax income every year—which, depending on how much you're making, is also tax-deductible.

For more information on the different types of retirement plans and how to set one up go to irs.gov

Don't let stock market-madness scare you out of socking away as much money as you can afford into your retirement accounts. Especially if you have a 401k with a company match, you can't find a better method of forced-saving. (Much like setting up an automated savings, if it doesn't appear in your bank account, you won't spend it!) If you or your partner has scaled back on your 401k because of the recent market losses, get right back in—this is the time to buy and save, not run. Trust me: By the time you really are ready to retire, the market will have corrected itself.

Educating yourself on your retirement savings options isn't the hardest thing in the world. But taking that first step sometimes is. So assess where your retirement savings are at and make it a priority to do all you can to help yourself. If you're not sure what to do, talk to someone at your bank or at an investment firm for advice finding the best retirement plan for you. Setting up an IRA can be as easy as applying for a credit card—you simply fill out an application. The only difference is you'll need money to open up your account with, which can be $25 or $3,000 depending on the financial institution where you open the account. Remember, the earlier you start saving, the longer you can enjoy your golden years.

Get more financial advice from our personal finance expert, Carmen Wong Ulrich!