Christopher Fess is a stock broker and chartered financial accountant. A financial advisor at Fess Financial, Christopher Fess works with a variety of clients, guiding them in their retirement planning through periods of employment and unemployment.
Saving for retirement when you are unemployed may seem like a daunting task. However, you have options. If you were laid off from work and have a 401(k), that money is still in your account. Do not cash out, no matter how tempting it is. It is better to let your money grow long term so that you have a better retirement. Instead of cashing out, roll over your old 401(k) into a traditional individual retirement account (IRA). This will give you flexibility and you can contribute to it as soon as you start earning any income.
IRAs also have tax benefits which can offer some immediate cash flow benefits. With a traditional IRA, your contributions are deducted from your taxable income. With a Roth IRA, your earnings are taxed upfront and you get tax-free withdrawals later on. Another option is solo 401(k)s which also have allowable contributions. Consult a financial advisor to determine which is ideal for you.
Your retirement savings with be your lifeline when you retire. Prioritize retirement planning. Treat it as an essential expense and contribute any amount you can. Any amount is fine. Just keep contributing. But do not take debt to contribute to an IRA as credit card interest rates are higher than the returns on most retirement accounts.
Saving for retirement when you are unemployed may seem like a daunting task. However, you have options. If you were laid off from work and have a 401(k), that money is still in your account. Do not cash out, no matter how tempting it is. It is better to let your money grow long term so that you have a better retirement. Instead of cashing out, roll over your old 401(k) into a traditional individual retirement account (IRA). This will give you flexibility and you can contribute to it as soon as you start earning any income.
IRAs also have tax benefits which can offer some immediate cash flow benefits. With a traditional IRA, your contributions are deducted from your taxable income. With a Roth IRA, your earnings are taxed upfront and you get tax-free withdrawals later on. Another option is solo 401(k)s which also have allowable contributions. Consult a financial advisor to determine which is ideal for you.
Your retirement savings with be your lifeline when you retire. Prioritize retirement planning. Treat it as an essential expense and contribute any amount you can. Any amount is fine. Just keep contributing. But do not take debt to contribute to an IRA as credit card interest rates are higher than the returns on most retirement accounts.
