While many people live paycheck-to-paycheck, it’s better to save money in order to have money for those times in your life when you might need it but be unable to work. For most people, retirement is a good end goal after what seems like a lifetime of daily work. With that in mind, what are some tips for saving for your retirement?
First, if your company offers a 401(k) or 403(b) match, where they’ll match what you contribute, do it! For instance, if you put $2,500 a year into your retirement plan, and the company you work for matches that, it’s a great deal– take full advantage of it. Whenever you can contribute the maximum allowed amount to a company retirement plan, do so– and the sooner you start the better because over time it’ll all add up to a nice sum when you retire. You should also utilize the traditional IRA and/or the Roth IRA in order to put away money now for retirement. If you’re self-employed look into a solo 401(k) and a Simplified Employee Pension (SEP) plan.
Next, check and see if there’s a retirement savings credit you can get based on your retirement plan contribution. Always ask your tax preparer about available tax credits.
Also, invest in a health savings account, which not only helps pay for health care expenses now, but also acts as a smart way to save toward retirement. These accounts are tax deductible on the way in and potentially tax-free upon withdrawal. After age 65, any assets in these accounts can be used for anything– not just health care expenses– nice!
If you’re able to live and/or retire in “the right state,” that can help you out financially. Certain states don’t take as much money from you as others do. States like Florida, Texas and Nevada don’t have state income taxes. No wonder so many people flock there, leaving high tax states like Massachusetts and New York.
Finally, get in the habit of setting aside some money from each paycheck to go toward savings. If, for instance, you make $50,000 a year and decide to put away 10% for a retirement savings plan each year, that’s $5,000 that’ll end up helping you out later on down the line. If not now, when? Don’t wait to start saving.