Simple Guide to Retirement Planning
How Do I Save Enough Money to Retire?
If you’re considering what you’ll need financially once you retire, you may find this is an overwhelming feeling. According to a recent statistic, Most Americans only have 12% of what they’ll need to live comfortably in their retirement years. If you don’t want to be a statistic when you reach that age, then don’t be. Take the necessary actions today to make the most of your financial future. Here are some proven tips for planning and saving for retirement.
- You can opt to save a portion of your salary each pay period and have it deducted from your pretax income and deposited into a retirement savings account called a 401(K). There are tax benefits for 401(K) contributions, and many employers will make contributions if you opt in.
IRA and Roth IRA
- In the standard type of IRA account, you can defer paying income taxes on a certain amount of your deposits, up to $6500 of pretax income depending on your age. Couples can contribute up to $11,000 per year, collectively. When you withdraw funds from the IRA, you then pay taxes on these earnings.
- Roth IRAs work on the same contribution model as IRAs except Roth IRA accounts are funded with after-tax dollars. After you’re 59 ½ years of age or older, you can make tax-free withdrawals from your Roth IRA account.
Claim tax credits
- The saver’s credit may be applied to those who contribute to standard or Roth IRA accounts. The tax credit is worth up to $2000 for individuals or $4000 for couples. There are income caps which may disqualify you from taking this tax credit.
- While these are suggestions for ways to save your earnings for retirement, these suggestions don’t show you how to save money.
- If you’re just getting started on saving money for your retirement, here are a few tips to help you streamline your budget and maximize the savings you contribute to your retirement fund.
Have a detailed budget
You need to know how much money you have coming in and going out. Without a budget, it’s very unlikely that you’ll reach your retirement savings goal.
Save more than you spend
If you have the ability to lower your expenses, do it. Save as much money as you can by adjusting your lifestyle now so that you can live comfortably in retirement. Cutting out that Starbucks latte each day could save you around $5000 per year! Think of all the ways you could save by spending less on non-essential items and services.
Build your emergency fund
Before you fund your retirement savings, ensure that your emergency fund is fully funded with up to six months of income for your family.
The reason you need such a sizeable amount handy should be clear — if you or your spouse’s income were to suddenly disappear, where would you be financially? Saving an emergency fund is a big step toward greater peace of mind.
Be creative and strategic
If you have valuable skills that you can leverage to generate more income, use them wisely and save that money. Funds that you earn above and beyond your basic needs can and should be saved.
Consider whether you can tolerate risk
Some investments such as CDs and annuities are considered low risk, because there is little chance, if any, of losing money. If you are willing to take a risk on your returns, you could invest money into mutual funds, index funds or individual stocks. The reward could be exponentially higher than low risk options, but there’s also the possibility that you could lose a great deal of money. It’s best to consult a professional before placing money in higher risk investments.
Understand your financial situation right now.
If you were to look at your checking account balance right now, how would you feel? How about your savings account? Is there enough money to pay all your bills, save a portion and still enjoy life a bit? If not, chances are you’re either spending too much money or you’re behind on some payments. If you’re facing a difficult financial situation, help is available. Call us today Call CreditGUARD Today to speak to a certified credit counselor today and to take back control of your financial situation.
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