After working for many years, there comes a time when individuals productivity halts mostly due to age. It is at this point that one is set to undertake retirement. When one retires, a range of challenges are bound to occur and these are attributed to the fact that the salary that served as a regular income is no longer available. Saving for this time is the best option that needs to be considered when one is working and made possible through having a retirement account. Amounts used for the retirement account are deducted from the salary earned by the individual and saved consistently until the time of 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. To increase safety of the amounts, there are set regulations to safeguard the saving at all times and in such way the agencies are required to comply accordingly.
Challenges that come as age progresses are numerous. 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 retirement, it means the monthly income is no longer available and the amounts saved in retirement accounts can therefore be used to cater for health needs alongside other financial requirements. The savings in the retirement account therefore comes in handy to save the situation and offer with a resource for catering for the prevalent needs. The retiree can also use the amounts in savings as a form of capital to set up a business that offers with regular income.
Access to the retirement account is regulated to discourage those saving form seeking to access the amount before its maturity. A range of penalties apply in the event that the individual seeks to access the amounts in the retirement account. 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. The government in this move seeks to ensure the tax exemptions are not misused by the individuals saving in the accounts.
The process to get an account is made simple and easy. Remittances t the account are regulated as well. In such way, workers are not constrained with finances as only a small portion is required. Deductions are made directly from the salary to make the process more convenient for the contributor and the collecting agents.