Are you ready to face your retirement?
- It could last longer than you think
- Medicare won’t cover assisted living
- Many still lack a retirement plan
It’s never too soon to begin planning and saving for retirement. Even if you’re only starting to sketch out your future, the steps you take today can help ensure a rewarding post-work life.
Here are some ideas and steps to consider as you look toward retirement.
Set Goals
Establishing clear, achievable retirement goals gives you motivation to prepare. Goals can steer you toward making wise financial decisions for the kind of retirement you want. Without a clear direction, you may drift off course and lose sight of your financial strategy.
Consider goals like establishing an emergency fund, paying down excess debt, and building a diversified portfolio. Think about long-term goals to guide your short-term decisions.
Max Out Your 401(k) Contributions
Federal regulations set a maximum amount you can contribute to your 401(k) plan every year. This amount increases to compensate for cost-of-living adjustments — in 2024, this maximum is $23,000.
Meeting the maximum contribution limit is wise for several reasons. You can enjoy tax-free growth up to retirement age and build a sturdy nest egg over time. You’ll multiply your savings if your employer offers matching contributions to your 401(k).
Open a Traditional or Roth IRA
An individual retirement account (IRA) can offer more tax advantages on top of your 401(k) plan. Traditional IRAs offer tax-deferred growth until withdrawal, while a Roth IRA offers tax-free withdrawals after you retire. IRAs also give you more control over your investment decisions, especially if you have no employer-sponsored retirement plan.
Open a Health Savings Account
A health savings account (HSA) puts aside money for health and medical expenses for now and in retirement. Contributions to an HSA are tax-deductible, and withdrawals are generally tax-free for approved expenses. Unused funds roll over every year, offering another avenue for long-term savings.
Know Your Social Security Benefits
Social Security generates income for retirees. You contribute to Social Security through deductions from your paycheck. Take time to learn what Social Security funds cover(disability benefits, Medicare) and what they do not cover (long-term care, private pension benefits) to develop your retirement saving strategy.
Learn About the Federal Thrift Savings Plan
If you’re a federal employee or in the U.S. military, find out about the Federal Thrift Savings Plan. It’s structured for government employees and offers alternative investments for very low administrative fees.
Get an Annuity
An annuity is a product offered by many insurance companies. It guarantees a dependable stream of income in exchange for lump-sum payments. Retirees take out annuities to account for extra expenses and ease the chances of outliving their savings account.
Make a Solid Withdrawal Plan
Have some basic strategies in mind for taking distributions from your retirement account. Such strategies include not taking pre-retirement withdrawals, managing taxable and tax-free distributions, setting aside medical expenses, monitoring your portfolio, and factoring inflation into your savings.
Learn More Retirement Strategies
These approaches to retirement savings can pay off handsomely when your golden years finally arrive. To find out more tactics for retirement finances, talk to a trusted financial advisor.
