Suppose, for example, that you use a program like Quicken or Microsoft Money to determine that your retirement savings should equal to $5,200 a year—which is the same as $450 a month. (This savings amount will produce roughly $15,000 a year of retirement income if you save for 20 years, increase your savings with inflation, and earn 9 percent.)
The first source of free retirement money
While $450 a month seems like a lot of money, you may be able to come up with this figure more readily than you might think. Say, for example, that you work for an employer who's generous enough to match your 401(k) contributions by 50 percent.
In other words, for every dollar you contribute, your employer contributes $.50. In this case, you need to come up with $300 a month to have $450 a month added to your retirement savings. To make this calculation, you divide the monthly savings amount, $450, by 1 + the employer's matching percentage, 50%. The formula $450/(1+50%) equals $300.
The second source of free retirement money
Also suppose that you pay federal and state income taxes of 33 percent and that you can deduct your 401(k) contributions from your income. In this case, the actual monthly out-of-pocket amount you need to come up with equals $200, not $450. To make this calculation, you multiply your share of the needed monthly savings, $300 in this example, by 1minus the 33% marginal tax rate, which equals 67% In this case, the actual amount you need to come up with on a monthly basis equals $200 because $300 times 67% equals (roughly) $200.
Sometimes, most of your retirement savings money can come from others
Admittedly, $200 a month is still a lot of money. But it's also a lot less than the $450-per-month savings you need to add to your retirement savings. In fact, most of the money in this example you need to save comes from other sources!
The preceding calculations argue for two tactics when saving for retirement. First, if an employer offers to match your contributions to something like a 401(k) plan, it will almost always make sense to accept the offer—unless your employer is trying to force you to make an investment that is not appropriate for you.
TIP: If you do want to contribute $300 a month to a 401(k) plan and need to reduce your income taxes withheld by $100 a month to do so, talk to your employer's payroll department for instructions. You may need to file a new W-4 statement and increase the number of personal exemptions claimed.
Second, any time you get a tax deduction for contributing money to your retirement savings, it's almost certainly too good a deal to pass up. As described in the preceding example, you can use the income tax savings because of the deduction to boost your savings so they provide for the desired level of retirement income.
Free Money For Individuals
Do you need free money to help achieve your dream? The government may be able to help you. The federal government is committed to improving the United States economy. In order to maintain a stable, vibrant economy, U.S. citizens must be productive. With the intention of encouraging productivity among American residents, the federal government gives away free money for taxpayers to use toward education, housing, small business investments, and other personal expenses.
Free money is available because government officials are well aware of some of the setbacks that U.S. citizens encounter when trying to achieve the American Dream. Many citizens strive to contribute to the success of the United States economy. Society has set standards that dictate success among the American people. The major components of success in America are education, home ownership, business ownership, and retirement. There are several reasons why many taxpayers find it difficult to achieve success.
With technological advancements on the rise, it is nearly impossible to function in society without a post-secondary education. Many citizens have pursued a college education. Unfortunately, some have dropped out. Others have avoided college all together. Some of the most common reasons why individuals delay their college education are:
•They cannot afford it.
•They want to avoid accumulating loans.
•They already owe a substantial amount of money in school loans.
•Interest rates are too high for individuals with a poor credit history.
Increasing the number of homeowners in the United States has a positive effect on the American economy. Free grant money is available for prospective homeowners. In order to encourage taxpayers to pursue buying a home, local government programs have been created to help individuals with down payment and closing costs.
Small businesses help to stabilize the U.S. economy. There are many benefits to starting a small business. Some individuals desire to start their own business, but find it difficult to begin the process. Many prospective entrepreneurs do not pursue starting or expanding their small business for the following reasons:
•They do not have enough money for startup costs.
•They cannot afford to hire more employees.
•They cannot afford to lease more space or purchase more office equipment.
Government officials recognize that small businesses help to improve communities, create jobs, and generate tax revenue. Because of the major impact that small businesses have on the economy, the government grants free money to prospective entrepreneurs who desire to have small businesses.
The government gives away millions of dollars in free money every year. Grants are available for personal expenses such as housing, education, small businesses, and retirement. Now is the time to apply for a government grant. Toward the end of the year, fewer funds are available. As a result, the chances of getting free money will decrease dramatically.
Both Stephen Nelson & Ask Lesko are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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