Savings for retirement can feel like an over-complicated, rule-riddled process that is ruled from above by the IRS. These complex rules and regulations can actually create more retirement and savings opportunities.
Common Retirement Mistakes
- Only Using a 401(k) – a 401(k) might be the most common way to save for retirement. Direct pre-tax payroll deductions make it easy. Tax-free growth makes it even more enticing. A 401(k) will help you save for retirement, but why stop there? Other traditional retirement accounts, like an IRA, can add increases financial security (and tax-free growth). Non-traditional retirement accounts, like an HSA, add flexibility for your retirement savings. In fact, the tax structure of an HSA is very similar to a 401(k), but it also lets you use tax-free dollars for medical expenses.
- Reduce Your Contributions with Age – one of the most common retirement misnomers is that you should reduce your contributions as you age. This reduces your monthly financial responsibility but also limits the tax advantages from your retirement accounts. It also reduces your dedicated retirement funds. Balancing money you need today (vs. retirement) can be difficult, but finding consistent ways to contribute, regardless of age, will ensure financial stability in retirement.
- Underestimating Medical Expenses (and long-term care) – Did you know a couple can expect to pay $275,000 in medical expenses after the age of 65? This is on top of Medicare. Savings for these costs will enable you to stay healthy without depleting your retirement savings. You can use dedicated tax-free HSA funds for these medical costs. In case you don’t use your HSA, after the age of 65, HSA funds can be used for anything just like your 401(k).
Don’t get stuck with what you can’t do for retirement. Do the best with what you can. Retirement savings builds over time, so little by little it really adds up. Use these tips so that you can get the most out of your existing retirement savings, and find new ways to save a little more. Invest in your health® (and retirement)!
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As always, the information provided is for your general background only and is not intended to constitute financial, legal or tax advice as to your specific circumstances. We recommend you consult with a legal, tax, and/or investment professional for any specific advice. We also recommend that you optimize your healthcare spending, maximize your savings, and better your livelihood!
Disclaimer: the content presented in this article are for informational purposes only, and is not, and must not be considered tax, investment, legal, accounting or financial planning advice, nor a recommendation as to a specific course of action. Investors should consult all available information, including fund prospectuses, and consult with appropriate tax, investment, accounting, legal, and accounting professionals, as appropriate, before making any investment or utilizing any financial planning strategy.