If you are behind on your retirement contributions, it means that you will need to contribute a larger percentage of your salary each month to catch up to where you should be. Fortunately when you are in your twenties you will not need to make huge adjustments to make up for lost time, but if you continue to put it off, you will need to increase the amount you contribute.
If you neglected to begin contributing at the beginning of the year, you can slide in current contributions to an IRA account until you file your taxes. This means you can make the maximum contribution for your account for last year, and again for this year, if you want to catch up on your retirement savings for the year.
If you want to increase your retirement contributions for a short time to catch up, you can do this by contacting your human resources department. You will need to fill out a retirement contribution form to set your new rate. You can contact them after a few months to decrease your retirement contribution levels back to the standard fifteen percent contribution.
Truthfully, if you are in your twenties you really do not need to worry about making up for missed retirement contributions as long as you begin contributing now, and you continue contributing through the rest of your career. As you move from company to company, you may choose to take your retirement contributions with you. Some companies require you to move your retirement if you are no longer with the company. The easiest way to do this is to roll the investments into a good IRA account.
Rolling your retirement accounts into new ones is a not a difficult process. The one rule you need to follow is that you role a traditional account into a traditional account, and a Roth account into a Roth account or your will end up paying taxes and fees. You can roll your entire 401(k) into an IRS account without worrying about the contribution limit for the year, because the IRS looks at a rollover differently than traditional contributions.
If you are going to open your own IRA, you should look at an investment firm and choose an option that allows you to pick solid mutual funds. An IRA at a bank is generally tied to a Certificate of Deposit (CD), and offers much lowers rates of return. These are guaranteed up to $250.000 per bank, but you will miss out on real growth if you go with this option. When you are older in your fifties and sixties you may ready to switch to this more conservative investment tool.
The key to retiring comfortably is to contribute regularly. Do it each month by signing up your work’s 401(k) plan and invest monthly into an IRA account for yourself. The ideal amount to contribute is fifteen percent of your gross income, but if you need to you can increase your contributions slowly as you get raises. In addition to retirement savings you should create a solid financial plan that will allow you to grow wealth. The financial plan can help you prepare to own a home, save for your children’s education and do other things that you want to with your life.
Catching up on your retirement contributions is not difficult to do in your twenties, but it will be difficult if you continue to put off saving for retirement. You need to begin saving for retirement today. After several years your retirement savings will begin earning as much as you contribute to them each month. This will allow you to really begin building your retirement savings.