Young investors planning for their retirements should consider Roth investment retirement accounts (IRAs) when determining how they will accumulate funds for the time they want to stop working.
People who are just starting to put money away for their retirement may want to gather the info they need on Roth IRAs as well as traditional IRAs as the age that most people expect to retire seems to keep increasing.
Data provided by a survey conducted by consulting firm Towers Watson indicated that 39 percent of respondents stated they plan to delay retiring, according to CNBC. The study indicated that the majority of the people who stated they would push back their retirement said they would wait for another three years.
"68 is definitely the new 65!," Stacy Francis, a certified financial planner in New York City, told the media outlet. "Delaying retirement leaves a worker with fewer years of retirement to finance, more time to save and earn returns, and higher Social Security benefits if they delay taking them."
Wells Fargo conducted a study of 1,500 participants aged 20 to 79 earning at least $25,000 but less than $100,000, which revealed that 75 percent of respondents plan to work during years typically reserved for retirement, in addition 25 percent plan to work until they are at least 80 years old, Reuters reports.
Wells Fargo director of Institutional Retirement and Trust Joe Ready told the media outlet that of the respondents who plan to work in retirement, "47 percent said that they are going to continue in the same job or a similar job of similar responsibility."
He added that the figure "raises a lot of social and economic implications. Will they have the physical ability to work, the mental capacity? What does that mean for the younger work force in terms of coming through and looking to get ahead?"
Amid these challenges, people planning for their golden years should be careful about what retirement accounts they utilize.
Roth IRAs can benefit investors by allowing contributions made to grow tax deferred and also take distributions tax-free. In order to attain these tax benefits, people need to make contributions to these retirement accounts out of after-tax income.
Alternatively, traditional IRAs involve pre-tax contributions and distributions that are taxed. Essentially, using a Roth IRA instead of a traditional IRA means choosing to be taxed now instead of choosing to be taxed in retirement. Data provided by the Center on Budget and Policy Priorities indicates that many Americans are paying income taxes that are either equal or close to historical lows.
Young investors can take capitalize on these advantageous tax policies by making contributions to Roth IRAs.