Saving enough for retirement is a concern and cause for worry for almost everyone, especially if you have started to appreciate the importance of retirement planning a little late in life. While everyone knows the earlier you start saving, the better it is, it is also important to appreciate that it is never too late to start saving for retirement. Some helpful tips and tactics:
Start to Save Immediately
If you have realized the importance of saving for retirement, you should not delay but start saving immediately as much as so you can benefit by compound interest to boost your savings. According to experts, no amount is too small to invest in your retirement account. If you are young, starting to save a little every month can help you to save more than starting late and saving more every month. For example, if you save $75 every month from the age of 25, you will have more savings than someone who puts away $100 per month from the age of 35.
Contribute to Your 401(K) Account
Find out if you are eligible to contribute to a traditional 401(k) plan offered by your employer. It can be a significant advantage if you can contribute pre-tax money as your current tax liability gets reduced while building your retirement corpus, which means, you can effectively contribute more without feeling the pinch. However, you need to decide if you should contribute to a Roth 401(k), keeping in mind your likely tax bracket post-retirement. According to Forbes, the 2022 limits of your contribution to your 401(k) is $20,500, while for 2023, it is $22,500. The limits for those 50 or older are $27,000 and $30,000, respectively.
Take Advantage of Your Employer’s Match
If you work for a company that offers to match your contributions to a 401(k) plan, you should ensure that you take full advantage of it. For example, if you earn $100,000 and contribute $5,000 to your retirement plan and your employer offers to match 50% of your contributions up to 10% of your salary, you would benefit by $2,500. It would be unwise to refuse to take the free money.
Set Up an IRA
You can open a traditional IRA account or a Roth IRA, depending on your income and whether you or your spouse participates in a retirement plan offered by your employers. The advantage of a traditional IRA is that the contributions are tax-deductible, and you will only have to pay tax when you make withdrawals after your retirement when possibly, you will be in a lower tax bracket. On the other hand, since you fund a Roth IRA with after-tax contributions, any qualified distribution after the age of 59½ will be free of federal income.
In addition to the above-mentioned steps, you can save more by making changes to your lifestyle and checking your expenses. Setting a goal for your savings and automating your savings can help you significantly to stay on the right path. You should deposit any windfall income into your retirement accounts and consider delaying receipts from your social security to boost your income later on says Chiang Rai Times.