Worried that you’re behind on your retirement planning? You’re not alone. Saving for retirement is a challenge for nearly everyone. If you’re like most Americans, you’re probably dealing with other financial challenges that feel more urgent, like paying down debt or funding your child’s education.
You may feel like you have plenty of time to get started. However, the earlier you start saving, the easier it will be to hit your objectives. Time is a valuable asset when it comes to retirement planning. If you start saving early, you give your assets plenty of time to grow and compound, which could help you accumulate more money.
Below are a few strategies you can implement to boost your retirement savings. If you haven’t started yet, or if you feel like you’re behind, now is the time to make changes and increase your savings rate. A financial professional can help you implement a plan.
Contribute at least up to the employer match in your 401(k).
Does your employer offer a 401(k) or similar retirement plan? If so, it could be your most powerful tool to save for retirement. Qualified retirement accounts such as 401(k) plans offer tax-deferred growth. That means you don’t pay taxes on your gains as long as the funds stay in the account. That tax deferral may allow your funds to compound at a faster rate than they would in a similar, taxable account.
Many employers offer matching contributions to these plans, and those matches could be the key to increasing your savings each year. For example, if you contribute three-percent of your salary, your employer may match your contribution dollar-for-dollar. That essentially doubles your contribution.
Every employer’s rules are different. However, the employer match can be an effective way to boost your savings rate with someone else’s money. If you’re not taking advantage of your employer’s match, now may be the time to do so.
Contribute annually to an IRA.
You don’t have to only use your employer’s plan to save for retirement. You can also take advantage of an individual retirement account, or IRA. There are various types of IRAs, but all of them offer tax-deferred growth.
Some offer other tax benefits, too. For example, the traditional IRA allows you to deduct your contributions, assuming you meet income limits. The Roth IRA doesn’t offer upfront deductions, but you can withdraw your funds tax-free. Consider using an IRA as an additional account to save retirement funds on a tax-favored basis.
Put your savings on autopilot.
One of the biggest obstacles to saving for retirement is simply the power of choice. Given the option, you may choose to use your money for pressing financial concerns instead of saving for retirement. Other bills or expenses may feel more urgent, so they become a higher priority than retirement savings.
You can avoid this risk by automating your savings. Treat your retirement savings like a mandatory bill, and set up automatic transfers to your IRA or other accounts. Once you take choice out of the equation, you’ll likely see your retirement balances increase quickly.
Take advantage of catch-up contributions.
If you’re age 50 or older, the next few years may be your best chance to save for retirement. Fortunately, you can take advantage of catch-up contributions to put away more money.
In 2018 you can contribute as much as $18,500 to a 401(k) and $5,500 to an IRA. If you’re 50 or older, however, you can contribute an additional $6,000 to your 401(k) and an additional $1,000 to your IRA, bringing your total contributions to $24,500 and $6,500, respectively. Look at your budget and find ways to take advantage of these additional contribution limits.1
Ready to boost your retirement savings? Let’s talk about it. Contact us today at Northern Plains Insurance and Financial. We can help you analyze your needs and implement a plan. Let’s connect soon and start the conversation.
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
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