Saving for retirement can feel a bit like being told to eat your vegetables when you were a kid. Even if it was good for you, it might not have been something you were eager to do.
Retirement Savings Tips
Or perhaps you’re plenty motivated to save for retirement, but not sure where to start, or if your current strategy is on target. Follow these five retirement planning tips and you will be on the road to building a secure retirement.
- Plan on a Long Life. Living into our 90s is no longer some outlier event. According to the Society of Actuaries, one-third of men age 55 today will live into their 90s, and one half of women will live that long. If you are in good health today, you should build a retirement strategy that can support you for 25 to 30 years in retirement.
- Aim to save 10 to 15 percent of your income. Social Security will provide some retirement income, but it typically is not enough to fund a comfortable retirement. The average monthly payout is around $1,400. To supplement Social Security, you should aim to save at least 10 percent, and preferably 15 percent of your income for retirement.
- Save for retirement using tax-advantaged accounts. If your employer offers a retirement account, such as a 401(k) or 403(b), having contributions automatically sent into your account from each paycheck is a great way to consistently save for retirement. If you don’t have a workplace plan, or want to save more, an Individual Retirement Account (IRA) is another valuable way to save for retirement. Both 401(k)s and IRAs offer valuable tax breaks. For an even better tax deal, you may want to consider enrolling in a high deductible health plan (HDHP). Once you have an HDHP you are allowed to contribute to a Health Savings Account (HSA). An HSA can be used to pay today’s health care bills, or you can treat an (more details in Tip #5).
- Grab the Maximum Retirement Bonus from your Employer. If your employer offers a retirement plan, chances are it comes with a matching contribution. That match is basically a bonus your employer will give you. You don’t want to pass that up! But, unfortunately, some savers don’t contribute enough to get the max match. If you’re already saving at least 10% or your salary, you are likely earning the max, but if you’ve yet to ramp up your contribution rate to that level, make sure you check that you are contributing enough to ensure you are getting the maximum company matching contribution.
- Consider the only triple-tax-free way to save for retirement: an HSA. Using an HSA as a retirement account gives you a rare opportunity to pocket three valuable tax breaks. Money you contribute today to an HSA will reduce your taxable income on this year’s federal tax return. While the money remains inside your HSA there will be no tax due on any interest earned, or investment gains. And, any time you withdraw money from your HSA account to pay for a qualified medical expense there will be no tax due. That triple-tax break makes an HSA a great retirement savings option. One bonus is that HSAs do not have a required minimum distribution (RMD) so you can let this money grow over a longer period of time!
Disclaimer: the content presented in this article are for informational purposes only, and is not, and must not be considered 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 investment, accounting, legal, and accounting professionals, as appropriate, before making any investment or utilizing any financial planning strategy.
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.