5 successful strategies for retirement planning
It is never too late to re-evaluate your savings strategies while preparing for your golden years.
Make sure you’re making the best of your retirement savings by reviewing these successful strategies below.
1. Diversify your savings.
You’ve heard the phrase: “Don’t put all your eggs in one basket.” This applies to your retirement savings – don’t save all in one place. There are options beyond saving for retirement in your employer’s 401(k), though this is a very good start. If you have not looked into any other modes to save beyond a 401(k), now is a better time than any. You have the ability to save for your retirement independently through the use of a Roth IRA or a Traditional IRA. The main difference between the two of these options is the income tax treatment on the funds in the accounts.
Roth IRA and a Traditional IRA
With a Traditional IRA you pay the taxes when you withdraw the money for retirement, while with a Roth IRA you pay the taxes when the money goes into the account. 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 develop. 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.
2. Track your progress.
It is very common to open a retirement account, set an automatic amount to transfer, and put your ongoing retirement savings on autopilot. While it is good to continue to save, it is still beneficial to continually track your savings progress. This can be as easy as checking your stats in a retirement calculator or meeting with a financial planner to plot out your retirement savings strategy. Be sure to continually verify that you are on track to reaching your retirement savings goal and that you’re open to making adjustments as needed.
3. Don’t derail your 401(k).
When changing jobs there is a lot of stress that comes along with the process: learning new duties, adjusting your benefits, and addressing any relocation concerns. Amongst the stress, don’t forget about your current savings in your 401(k) from your previous employer. When you transfer your funds, it’s important that you transfer your balance from one retirement account directly into another. Don’t lose a large chunk of your hard earned retirement funds for the sake of simplicity.
4. Spare your 401(k).
The period of your 20s to your 40s is the most expensive time of your life. It can seem like your finances are already spread so thin that you do not have enough funds to put anything towards retirement. That being said, don’t let saving for retirement take the back-burner in your budget. If you allocate a certain percent to retirement automatically, you’ll learn to live without it, or adjust your finances to meet the requirement. When you reach your golden years, you’ll be glad to have dedicated funds for your retirement.
5. Minimize your debt.
This strategy works on multiple levels of your finances and is especially beneficial when it comes to your retirement strategy. Decreasing your debt so you have more funds free to go to your retirement needs will help put less pressure on your budget as you get closer to approaching your retirement age. This strategy will vary from person-to-person and can consist of paying off any loans, resisting the urge to buy a new car, paying off your house, and cutting out those unnecessary expenses.
Adopt these successful savings strategies to ensure that your golden years stay golden. If you have any questions at all when it comes to your retirement savings strategy and goals, we are here to help!
The information provided in these articles is intended for informational purposes only. It is not to be construed as the opinion of Central Bancompany, Inc., and/or its affiliates and does not imply endorsement or support of any of the mentioned information, products, services, or providers. All information presented is without any representation, guaranty, or warranty regarding the accuracy, relevance, or completeness of the information.