When it comes to saving for retirement, there are plenty of routes that you can take. Which methods you ultimately go with will depend on several factors, such as the money you have available, how much time you have, and what your tolerance for risk is. If you are just starting to plan for retirement, or if you are simply looking for new ways to save money for your future, here are a couple of suggestions to get you started.
Personal Savings Account
One of the simplest options you can take – but also the option with the lowest earnings potential – is to open up a separate savings account. By opening up a new account, and depositing a little bit of money into it each week, you can slowly accumulate money over time. This option is best for people who have a lot of time until they retire, and who just want to pad their savings a little more. The interest you earn on your savings likely won't be a lot, so this method isn't as good as some others on this list. However, you only need to put in a little at a time, and when it comes time to retire, you will have a decent amount of money in this account waiting for you.
If the option is available to you, one of the better options you can take advantage of for retirement savings is contributing to your employer's 401k. With this option, a portion of your paycheck is taken out each week and deposited into a savings account, and you do not pay taxes on it (taxes are not paid until you make a withdrawal). With a 401k you get to decide how your money is invested, with most programs offering a spread of mutual funds. Many employers now offer 401ks, and will also contribute funds to it on your behalf, meaning you get even more savings. Talk to your employer about the savings and investment plans they offer, and try to take advantage of them if you can.
For those of you that want to invest on your own, or who do not have an employer-sponsored program available to you, you should consider investing in a mutual fund. A mutual fund is a type of investment program that is funded by shareholders, professionally managed, and trades in diversified holdings. Essentially you invest funds along with many others, and the managing professional picks and chooses which fund to invest in. These will usually be spread out into different areas to minimize risk.
If you are going the mutual fund route, you should also look into Exchange Traded Funds or ETFs. Fees are typically lower on ETFs and are considered to be more tax-efficient. There are some differences between how ETFs and mutual funds are run and managed, so be sure to read up on ETFs for retirement if you are interested in taking this route.
Know All Of Your Options
The three options listed above are just the tip of the iceberg. To save for retirement you can also go with annuities, deferred annuities, invest in stocks or bonds, or invest in things like real estate. In order to make the best decision, you should do as much research as you can. The more you know, the better off your retirement savings will be.