A large part of our older population relies heavily on social security to help them live stable lives during their retirement. Unfortunately for the younger generations, social security is due to run out in 2036, meaning we are all going to have to find other methods to save for our retirement. If you are unsure about the steps to take to start saving for retirement, you can use the following ideas as a start.

Pension, 401(k) and Other Retirement Plans

If you currently work for the government or for most companies, they most likely offer a 401(k), 403(b) or an equivalent pension plan for their employees. These plans are typically funded one of three ways. The company could  fund the plan based on the employee tenure, and pay out when the employee has stayed a certain length of time. Or the employee may be required to fund the plan entirely while the employer provides the most suitable investment options.  The last is a match-based program in which the employee injects a certain amount of funds into the plan, and the employer matches a certain percentage of the deposited funds.

Regardless of a company match, it is always important to contribute to it yourself. It is always the best to take ownership of your retirement savings. The more you put away now, the more you will enjoy your retirement later.

You could also open up a traditional IRA separate from your company offered retirement plans and fund it yourself. There are limits to how much you can contribute every year so be sure that you stay within the limits.

The greatest benefit to these retirement plans is that these are tax deferred plans. This means that the accounts are funded with pre-tax dollars and continue to grow tax free until they are withdrawn. This way, more of your money compounds every year and should build up a bigger portfolio (even after paying tax upon withdrawal) than if you were investing after tax dollars.

Roth IRA and Roth 401Ks

With a Roth IRA account, you are getting a bit of a tax break. Because the money you deposit into this account has already has taxes taken out of it, the money is not taxed again when distributed to you after you retire. The government will also insure your Roth IRA account for up to $100,000.

Most retirement accounts including IRAs and 401Ks are subject to contribution limits. In addition, highly compensated employees or individuals with high annual income may be limited further in how much they can contribute to these plans. Still, whenever it is possible to put away some savings in these accounts, you should make it a point to do so as the tax benefits just can’t be beat.

Invest in Stocks in a Taxable Account

Investing in stocks need not be a gamble if you use common sense and research the companies to pick the financially sound and profitable companies. The problem arises when the investors ignore sound judgement and try to invest for short term profits. It has been proven again and again that it is not possible to time the market for superior returns consistently. If you have time and some financial know how, you should research the companies you want to invest in and pick solid profitable and possibly undervalued stocks with the goal to stay with your investments for a long term.

If you just can’t find time to research or are unsure about your understanding of the stock market, buying the diversified market index fund or an etf might be a great option.

Develop Other Income Streams

With today’s fickle job environment, it is always a good idea to look for other opportunities to generate additional income. Who knows, these might one day grow big enough to allow you to leave your current job. Many a successful business was started as a hobby on the side that grew and took on a life of its own. Consider using your creative abilities to help people with projects, find a way to monetize your passion, or you can do simple things like online surveys with SurveyHead.com when you have a moment or two.

Your Home

Do you consider your home an investment? You definitely should. Your home is an asset that provides utility as well as capital appreciation over time. By staying current with your mortgage payments and maintaining the house well, you build up your home’s equity. When you get close to the retirement, you can tap into this equity by either selling the home (and moving to a cheaper retirement destination) or even rent it out for monthly income which could be really nice if the mortgage is all paid for.

Final piece of advice: Most look forward to retirement as the time when they will be able to fulfill their dreams and passions that they worked really hard for decades to pay for. Perhaps it is world travel, or just sitting on the beach sipping margaritas, or may be take up a creative activity to nurture your soul. You should instead try and align your career with your passions now in a way that work and play becomes one. Sure, someday your body will not be strong enough to keep you working, but the fact is that people who enjoy the work they do typically do better in their careers and make more incomes over their lifetime. Just something to think about.



Jess Wagner is an experienced freelance writer with over 4 years of experience. Originally from Poway, California, Jess Wagner graduated with a Bachelor’s in English from San Diego State University. After college, Jess Wagner made downtown San Diego her home.