5 Strategies for Retirement Planning
The best time to start preparing for retirement is today.
Check out these savings strategies to help you evaluate your plan for retirement – and enjoy the peace and relaxation of your golden years.
- Diversify your savings
You’ve probably heard the phrase “don’t put all your eggs in one basket,” and this remains true with your retirement savings.
A good start is your employer’s 401(k), but there are options independently with a Roth IRA or a Traditional IRA. The main difference between these two accounts is the income tax treatment on the funds within the accounts.
With a Traditional IRA, you pay taxes when you withdraw the money for retirement. Traditional contributions may be tax-deductible and taxes are deferred until you begin withdrawing funds. With a Roth IRA, you pay the taxes when the money goes into your account. Your advantage with a Roth IRA is tax free earnings and qualified withdrawals are free.
There is a certain income level where you can no longer contribute to a Roth IRA. If you’re in a lower income bracket, a Roth IRA is the best current option, but as your career and family changes, there might come a time to consider shifting to a Traditional IRA.
Depending on your income, you may not qualify for a Roth IRA – once you hit a certain income level (either individually or as a couple), you are no longer able to contribute to a Roth IRA. The decision between the two accounts should also be based on where you fall in the tax bracket, which is likely dependent on your current situation. If you’re currently in a low tax bracket, then a Roth IRA will be the best current option for you. This will change as you and your family develops. When you reach the higher tax bracket, you should consider shifting to a Traditional IRA. Finally, in the case that you have a 401(k) with your current employer, a Roth IRA will be the better option due to the possibility that you will be unable to qualify for a tax deduction on a Traditional IRA.
Track your progress
Putting your ongoing retirement savings on autopilot is normal, as most people set up automatic and periodic transfers. However, it is still beneficial to continually track your savings progress. This can range from checking your progress on a retirement calculator to meeting with a financial planner to plot out your strategy. Be sure to continually verify that you’re on track to reaching your goal.
Don’t derail your 401(k)
Changing employers involves a lot of stress, including the transfer of your retirement savings. When you transfer your funds, make sure your balance directly transfers from one account into the other.
Learn to start saving
Your 20s to 40s are the most expensive years of your life, and it can be difficult to remember to save for the future while trying to make ends meet. Still, you shouldn’t let retirement be on the back-burner of your budget. Setting up automatic allocation of money to your retirement fund can teach you to live without it, and you’ll be happy you did when you reach your golden years.
Minimize your debt
Doing this is beneficial on all levels of finance, but especially so when it comes to your retirement. Decreasing your debt will gives you more funds and less stress on your budget as you approach retirement age. Loan payoff strategy differs from person to person, so find what strategy work best for you.
Adopt these successful savings strategies to ensure that your golden years stay golden, and when you have questions when it comes to retirement savings, we are here to help!
Consult tax advisor