The first thing that comes to mind when one says retirement is monetary savings, but there is something more important associated with it – having a retirement account.
According to William Schantz, collecting retirement funds is not enough; a proper account needs to be set up to ensure that the funds are safe, and the best way to do that is to set up a retirement account in a bank.
Though it might seem like a lot of work, especially if other accounts are present, it is worth it. A retirement account provides you with a separate space to allocate your retirement funds and makes managing finances better while you plan your retirement. Also, when one does retire, not much work has to be done to separate the retirement funds from other savings.
Here are William Schantz’s recommended steps to setting up a retirement account.
Know Your Account Plan
You need to know which kind of a retirement account you want to open.
A workplace retirement plan or an individual retirement account.
With the former, a set amount of your income is sent directly to the account. This happens when one receives their paycheck from work.
When it comes to an individual retirement account, the process is a bit different. It includes a person working with a broker to set up an account for their retirement funds. The client deals with the account activities themselves and is responsible for putting away money every month. That too through their existing bank accounts as per William Schantz.
Know Your Account Type
You will either choose a Roth account or a traditional one.
Roth retirement accounts are funded by post-tax incomes. This means that money is transferred to the account with the income tax paid.
The opposite happens in a traditional one. Taxes are paid at withdrawals. When it comes to assessing between these two, the first option ends up being a better one. This is because of the rising tax brackets in the future. If the income tax is taken care of beforehand, then a more significant amount would not need to be paid later.
William Schantz’s Next Step
Next comes actually opening the account. In today’s world, the process is simple.
If you want to open a Roth retirement account, that can be done online. All you have to do is visit your bank’s website and apply for an account by filling in your details and providing the necessary information.
Opening up an individual retirement account is easier through a brokerage. In both cases, the information is similar. It includes personal information, proof of citizenship, future inheritors, banking information, and other details.
Time to Contribute
Once your account is set up, then you start adding funds.
It depends on how much you want to add every month or how much time you want to add another payment.
When it comes to a workplace retirement plan, a set amount is added to your retirement account monthly. This is deducted from your paycheck before it is handed over to you.
As per William Schantz, this reduces the hassle of making payments yourself. Along with that, it is also easier to keep track of the money contributed to the account.
For individual retirement accounts, one has to plan and contribute accordingly.
William Schantz’s Advice
Setting up a retirement account is easy. Managing it is a bit tricky. A proper plan should be made regarding how much needs to be saved. Along with that, funds should also be invested to increase cash flow for the future.
William Schantz suggests these investments be made in stocks, bonds, or even properties. The main idea remains to increase the amount of savings to provide for a stable and secure future, especially in aspects including finances.