Image by: Ken Teegardin
By Michael Sterling

Probably the last thing that is on young people’s minds today is saving up for retirement. In this day and age, it’s virtually impossible with student loans and credit cards piling on top each other, creating a never-ending supply of debt. But as one get’s older and our twenties are behind us, the word “retirement” becomes part of our everyday vocabulary.

A 401(k) plan, or something like it, should be imported to your financial plan if you want to prepare a stable future. Even if saving money isn’t your strong suit, there are plan options that work with you to get you there. Trust me, as someone who wasn’t taught great spending habits, there are plenty of routes you can take to get you more cash.

401(k)s vs. IRAs

Many people debate over 401(k) versus Roth IRAs, both are good choices and have their benefits. Every time I’m asked which one is best, I always respond with, “Where do you see yourself in 10 years?”

In today’s economy, jobs are pretty scarce and it’s a rarity to find someone who will be with a company for longer than five years. In the old days, employees were loyal to their companies. My grandmother was with the Water Department for nearly four decades. You have to figure out if it’s smart to invest in a plan that limit your roll over abilities.

If your company offers a 401(k) match (most will have a minimum of 3%), you can obviously start tremendous growth towards a good stack of cash down the road. However, you should consider your future with the company. One bad quality about a 401(k) is that once your fired or laid off, it’s no longer involved with that company and you should roll it over to a Roth account.

If your employer offers a Roth 401(k), your savings can be rolled over to that plan, but a lot of employers don’t have that option since it will cost them money. Roth IRAs are a great way to save for retirement without having to rely on a company‘s exceptions. Most freelancers and people in the arts have these kinds of accounts.

With Roth 401(k)s, you can pay taxes upfront to avoid future taxes. This can be a great incentive for you in saving for the future, since a lot of economists are expecting taxes to rise in the coming years. By paying your taxes now, you won’t have to pay them later – when they might double.

Use Other Plans To Escape Penalties

You can surpass the fees that come with 401(k)s. Early distribution for medical, first-home purchases, and education usually require a 10% penalty, since withdrawals are restricted until you reach retirement age – which is 59 this year.

There’s nothing wrong with having multiple plans open all at once and using them as a crutch. So while your 401(k) is growing, and you have maxed out your company’s match, IRA plans can be your best friend. According to Moratta On Money, there are many loopholes you can do when caring for a separate account.

With Traditional IRAs, you can make a nondeductible contribution with no limit on your income. Once you do this, you can convert the funds to a Roth IRA and from there on out, the money will be tax free. This account can then be used for emergencies, instead of having to deal with the fees a 401(k) account will surprise you with.

Have An Automatic Plan

Probably one of the best kept secrets to creating a great retirement plan is one of the easiest. Make everything automatic! Your 401(k), rent, bills, loan payments, etc. By going to your online banking account and selecting the option for automatic bill pay, you can shed a ton of anxiety about your future, because it will all be done for you.

Here’s a tip: each year, when you get a bonus or raise, make minor increases from your paycheck cuts to go towards your 401(k). You won’t miss it and the savings will only multiply. Work with an investment banker to help you develop an asset collection strategy so you can minimize risks moving forward.

Another idea is to open a separate account that will automatically take, say 5%, from your paycheck. Every six months, bring the money in this account to your investment banker and use it towards other investments, like stocks. From there, you can add it’s profits to your 401(k). Save and Repeat.