After working for many years, there comes a time when individuals productivity halts mostly due to age. At this time the individual has no choice but to retire from service and head home. Many challenges come with retirement and these are mostly attributed to loss of a regular income. It is for this reason that recommendation is made for one to have a retirement account. The account receives a set amount of money from the individual’s salary and this is then saved in an account where the funds are set to be accessed after retirement.
To encourage the saving habits using this account, the government exempts that interest earned from this account from being subjected to taxation. Through this approach, it means that the saving individual gets an opportunity to grow the saved amount hence get better returns at the time of maturity. Interest generated by this account is not taxable and in such way, it means the contributor does not risk making any losses from investing in this account. The government also continually keeps strict regulation on the agencies which undertake the responsibility of collecting the funds to ensure the amounts are always safe and ready at the time of need.
There are numerous challenges that come with old age. At the age of retirement, the body is already worn out and this means that it does not have full capacity to withstand numerous health complication that come at this age. With no regular income, this might be a challenge to cover for the cost of treatment alongside other personal requirements. With the saved funds, it mean the retiree gets access to a reliable resource they can use for the prevalent health needs among others. It also provides with a resource for an investment that can offer with regular income to the retiree.
Amounts saved in retirement accounts is set to be accessed after retirement and it is for this reason that regulation are in place for access t the funds. In this way, there are penalties and charges applied to the account if the depositor seeks to have the money before the retirement dates. Individuals who are subjected to early retirement as a result of incapacitation are however considered to have access to the mounts before the set dates. This regulation is in place to discourage the population to use the opportunity and deny the government of taxes.
Making contributions to the retirement account is made simple and convenient for workers. Remittances t the account are regulated as well. In such way, it helps avoid instances of financial constraints on workers as they seek to save more. The amounts are deducted for the monthly pay of the individual and therefore reduce the risk of misappropriating the amounts and failing to make contributions in time.