Why should I set up a retirement account? What's the benefit?
Convince me to set one up...what's the benefit to me?
Best Answer
2775 points
Oldman answered one year ago …
The benefit is that you have something that belongs to you if you are disabled, retired, and need someone to help with your chores. The advantage is that with a tax-shelterd account, the dividends and short-term sales aren't taxed - now. The best type is a Roth, if you earn less than 160K (gross including tax-exempt interst). But, even a partial deposit to a roth can grow, without the destruction of periodic tax bites. You also should have a post-tax (a taxable) retirement account, so that you can dig into it when you might need a ramp for your cottage by the lake...without destroying the value of the funds in a shelter...or having to finance retirement health costs via a reverse mortgage on your homestead.
Now all this is very conventional thinking...and perhaps with the US' deepening debt and depreciating dollars, Social Security and Medicare may not be there for you later...so a retirement account set up is probably essential.
If you are the type who has to have the latest IPOD version and lives to drink Starbucks, who needs a Hummer and a McMansion to feel secure, but has no real wealth and only debts, the government will, once you are in the majority, somehow bail you out, but perhaps not on the terms to which you have grown accustomed.
On the other hand, if you foresee a short life, with demise prior to your 50's, then a retirement account is not for you.
Also, if you have a secure pension system, then a retirement plan will provide some opportunity to spend beyond the annuity's payments, when necessary.
If you have children...perhaps they will support you; it would be better if you could visit and not be dependent. Later on they could remenber that at your own visitation.
If you don't have children (or maybe they don't want to take care of you) it's nice to be able to pay a teenager to weed the shrubs that have grown too tall around the cottage by the lake...or to help you get your diapers washed.
These are the benefits of a retirement plan...and I have the experience and satisfaction from setting mine up 50 years ago, and using it for over a decade.
Answers
4085 points
EthanR answered one year ago …
Oldman's answer is so good, I really have nothing to add to it, except this. Your choice:
Start a ROTH IRA OR practice saying "Welcome to Wal-Mart". They are good about hiring Seniors.
Start a 401k, which gives you pre-tax investments that are often partially matched by your employer, OR become very proficient at clipping coupons.
Start a retirement account OR learn to enjoy and savor the fine quality of Rahman's Noodles.
Start a retirement account OR move to a town where the dollar stores are in abundance.
How do you see your golden years? Fishing, golfing, gardening, spending time with your grandchildren, traveling, being active in clubs and social activities, OR working a job every day until your health can no longer allow you to do so?
These are just a few of the benefits to opening that retirement account. And the sooner the better!
204 points
helpme answered one year ago …
Oldman and Ethan have excellent answers. I retired 8 years ago. I started a 401K as soon as I was able to take advantage of the company contribution. I also invested in an IRA. Too bad they didn't have Roths. I receive Social Security ( for how much longer, I don't know.) and a pension (which is not likely to go away, but who knows). If I had not set up a retirement account, my lifestyle (and my grandchildren's) would not be what it is today. Open a retirement account even if you can't keep up with the Joneses. As Ethan says, the sooner the better!
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951 points
Grudun answered one year ago …
So buddy, you would only ask this question if you were trying to find an excuse not to save money for when you can't work anymore. So lets look at all the options and figure out what it will cost you in time and treasure.
Well you can trust the government. Yes, I am serious that is a real option. By the way you are rolling on the floor I can see you don't trust them either. I know they promise a check when you get old enough or get disabled, if you worked enough and if they don't change the rules and if you can figure out the paperwork and if the world doesn't end and if about a hundred other things. But they are even telling you that that check is going to be smaller that what you need to live comfortably. Yeah, I hear you that they increase it every year but they cook the numbers on how much inflation really is, you can ask me about that later if you want.
Well if you don't trust the government, do you think your employer is going to take care of you. Well do you have a pension, you don't know well then that means you don't. If you did you would have to tell me how the company is going to pay it. Almost every pension is underfunded and most companies that offer them are not doing so well, look at the airlines and auto makers. And guess who gets to take care of your pension if the company can't, yep our old friends in the government. They can't pay the pensions they are already responsible for so they are cutting the "guaranteed benefit". Oh you were thinking of a government pension, well it might be better off but the government ones are just as underfunded and the fun thing we have to remember about Uncle Sam is he makes the rules and he can change the rules. So when Uncle Sam only has $100 Billion and needs to pay $300 Billion, how long till he changes the rules on you.
Oh you are going to rely on you family like they traditionally do in Asia, it could work but tell me how many kids are you going to have? Only 2, well how are they going to take care of you and your spouse and pay the high taxes all the government debt is going to cost, and raise their own kids. Didn't think about that did you. Well maybe they can help a little, but then they will have trouble later.
Well you think you will just work until your time. Good thought but what will you do if you get sick or hurt. Yeah I know it won't happen to you but if you couldn't walk what job will you do. Got any good connections. Maybe that guy you helped a long time ago will be able to help you, but he will probably be in a similar position.
Okay, what if you pay for your future yourself you only need a million or two to live safely off treasury interest. Can't make that much well then lets talk about setting up a retirement account. You can invest in stocks and get a better yield than those treasuries and it will build up over time. How much you ask well just save a few hundred a month in good investments and in 20 or 30 years you should have enough to be comfortable regardless of what the government throws your way. With a retirement account you can stick it to the government and pay taxes when you want, now or when you take the money. You also have some cash set aside in case you get sick or hurt. It won't cramp you lifestyle much now, maybe a smaller cable package, one or two pieces of clothing less and one less dinner out a month. Save that money when you are younger and invest it well and you can live in comfort later. What, what if something happens to you, well you can pass it on to your spouse or kids and they can get most the same benefits.
Otherwise there is always the lottery...
