If you started saving for retirement early you are money savvy and, chances are you’ll hit your retirement goal. However, if you’re like most Americans, you didn’t start right away and will need to plan for a possible retirement savings shortfall. How can you make up the difference? Don’t put off saving more later, start now! Now is the time to start maximizing your savings, while you still have time to make up the difference. Review your saving and spending habits and assess what you can do to save more this year:
If you’ve received a bonus at work or inherited money, instead of spending it, save it! Expecting a tax return? Add it to your emergency fund, start or max out Roth IRA contributions, or invest it into another investment. If you have debt, pay it off using your refund
Overspending, credit card debt, and debt in general, will hamper your savings if your extra income goes toward paying the debt. Not living beyond your means is easier said than done, right? Controlling your spending and sticking to a budget should be a priority for you in 2020.
Make sure you’re contributing enough in your employer’s retirement plan to receive the employer’s matching dollars. If you’re not saving enough to receive a matching contribution from your employer (commonly a 2-4% match), you’re throwing away ‘free money.’
Max Out Your Retirement Contributions. Roth IRA contributions are $5500 if you’re under 50, $6500 if you’re over 50. In your Tax-Sheltered retirement savings accounts, max your contributions at $19,500 and if you’re over 50, $25,500.
Take Some Risk. If you have your retirement savings in an interest-bearing account outside of the stock market, you will not keep up with inflation in retirement over time. Meet with me to have your investor risk profile evaluated to determine how much market risk you can tolerate. Having 100% of your retirement savings in the stock market may not be best for you, but all of it outside the market may not be either.
Be Aware of Future Tax Implications. Part of your retirement savings should be in tax-sheltered accounts. Discuss investment options and their tax benefits with your financial advisor and your tax professional so you fully understand how taxes impact your retirement savings contributions now and in retirement. If you’re anticipating retiring in the next 1-2 years, this is critical. Many new retirees don’t realize that their taxes may dramatically increase from liquidating too much from their pre-tax retirement accounts during the first five years of their retirement.
Monitor Your Investments. Always meet for a financial review at least yearly to determine if your risk tolerance, fund choices, and timeline until retirement are still on target. Getting financial help is never a bad investment.
In addition Prestige Financial Advisors specializes in providing strategies and guidance for those who want to be more money savvy. If you have retirement savings of five million dollars or $50,000, we can ensure it works as hard. As a result, we offer our experience and knowledge to help you design a custom strategy for financial independence. Contact us today to schedule an introductory meeting!