Why Invest?

Why invest? There are two major reasons for investing: retirement and increasing your wealth.

Nobody wants to work forever! One of the most important things you can do financially is invest for retirement. If you start now while you are young, the longer your money has to make a profit and the more you get from compounding.

There are two main types of accounts used for retirment investing: 401 (k) plans and individual retirement accounts (IRAs)

The 401 (k) plan takes its name from the section of the tax code that describes it. A company sets up this type of plan for its employees. Then the employees can contribute up to a certain percentage of their salary. In most cases, the company will match, dollar for dollar, the amount of oney that the employee contribues.

An IRA is established by an individual. You can have both an IRA and a 401 (k) plan. The amount of money that you can contribute is adjusted annually. There are two different types: traditional and Roth IRAs. In the tradition IRA, the money that you contribute is subtracted from your earnings before you pay taxes. Payment of taxes is deferred or put off until you withdraw the money later in life. This is great for people who expect to earln less money when they retire than while working. They will be taxed at a lower rate. Roth IRAs are contributions that are already taxed. You will not pay taxes on it when you withdraw it.

You should also invest to increase your wealth and gain financial security. Having money gives you the ability to realize many different goals. Put a little away on a regualar basis. You can build up savings to one day do what you want.