Whether you’re just starting out in the workforce or are an established professional, planning for your retirement is essential. Regardless of where you are in your career, if you haven’t already invested in a retirement strategy, now is the time to act. Use these four tips to save up for those golden years.
1. Figure Out Your Retirement Timeline
Before coming up with a strategy, you need to decide at what age you want to retire so you can prepare accordingly. You also need to keep your current age in mind. For instance, if you’re in your 40s or 50s and haven’t started saving yet, you’ll need to set back more money than someone who is in their 20s or 30s.
It’s a good idea to aim for a monthly retirement income that ranges between 70% and 80% of your working income. Knowing how much time you have to prepare your finances for this monthly income range may alter your strategies. Some retirement saving options may be better suited for longer time frames than others, which will give you insight into which money-saving approaches will work best for your situation.
2. Take Advantage of Your Company’s Retirement Plan
Many employers offer a matching contribution perk with their retirement plans. This means that the company is willing to contribute a certain amount of money or a percentage of compensation to an employee’s plan. If you work for a company with this type of employer-sponsored retirement plan, make sure you assess it to figure out how much money you have to pitch in to get the full contribution from your employer.
Also, many workers have a waiting period for this matching contribution to officially become theirs. This time frame varies for different companies, so it’s vital to find out how long you need to stay with the company before the funds from the employer are 100% yours.
Roth IRA vs. Traditional IRA
Companies sometimes offer different retirement plan options. The most common types are the traditional 401(k) and the Roth 401(k). With a traditional 401(k), your money isn’t taxed until you retire and begin withdrawing the funds.
Conversely, with a Roth 401(k), you pay taxes on the contributions before they are put into the account, meaning you can withdraw the money tax-free when you retire. A Roth 401(k) may be the better option if you think you’ll be in a higher tax bracket when you retire than the one you’re currently in.
It’s important to note that even if you choose this option, what your employer matches will go into a traditional 401(k), which means you will owe taxes on that money when you pull it during retirement.
3. Open an Individual Retirement Account
If you’re an entrepreneur or work for a company that doesn’t offer a retirement plan, you may benefit from opening an IRA. Banks, brokers, and robo-advisors can help with this process. They may suggest the following IRA plans:
Traditional: You can contribute pre- or post-tax dollars. Depending on your financial circumstances, these monetary additions may be tax deductible.
Rollover: If you have a previously qualified retirement plan, such as an employer's 401(k) plan, you can transfer that money into a traditional IRA.
Roth: You add after-tax funds, allowing you to withdraw them tax-free when you’re at least 59½.
Precious Metals: Investing in gold, silver, platinum, or palladium can be quite lucrative. You can use IRA-approved products and transfer all or part of an existing IRA into a precious metals IRA tax-free and without penalty.
Remember that you can invest IRA money in stocks or bonds, meaning it has the potential to grow exponentially. While you can manage these investments yourself, hiring a financial advisor may help you set up a profitable financial strategy.
4. Capitalize on Aging
Getting older is beneficial when it comes to making more money for retirement. If you’re over 50 (or when you turn 50), plan contribution limits are increased, allowing you to save more money as you get closer to retirement age.
Additionally, the longer you delay collecting Social Security, the more money you’ll get. You can start receiving benefits at 62, but the monthly benefits will increase if you wait until you reach full retirement age.
Make the Best Out of Your Golden Years
No matter your age, saving for retirement is a must. Setting money back may not always be easy, but it guarantees your transition to retirement goes as smoothly as possible. As long as you are proactive and financially prepared for your future, you’ll be able to enjoy your golden years to the fullest.
Use a Retirement Planner