A retirement plan is a financial strategy that helps individuals save and invest money for their retirement years. It is designed to provide a source of income during retirement when individuals are no longer working. Retirement plans can be offered by employers or individuals can set up their own plans.
There are several types of retirement plans, including:
The amount you should contribute to your retirement plan depends on your individual financial situation and retirement goals. As a general rule of thumb, financial experts recommend saving at least 10-15% of your income for retirement. However, the earlier you start saving, the less you may need to save each year to reach your retirement goals.
Withdrawing money from your retirement plan before retirement age can result in penalties and taxes. For example, if you withdraw money from a traditional IRA before age 59 1/2, you may be subject to a 10% early withdrawal penalty in addition to income taxes on the amount withdrawn. However, there are some exceptions to these rules, such as for certain medical expenses or first-time home purchases.