Boosting Your Retirement Savings

Posted on: in [ Retirement ]

In our last blog post we talked about the most common mistakes we see when it comes to retirement. Now that you know what mistakes you’ve been making, it’s time to get going on the right track.

 

First, you need to get yourself organized by identifying the need to start now and what goals you want to pursue. You also need to look at your current financial situation to shore up your savings account and reducing your spending.

  • Recognize that you need to start now- here’s the difference between starting young or waiting until you’re older to save for retirement. In order to reach $2 million in a retirement account earning seven percent by age 65, a 20-year old would have to contribute about $245,000. For a 50-year old to reach the same $2 million in the same account at age 65, they would have to contribute $1,008,000. That’s a difference of $763,000 in contributions. Start saving now.
  • Identify goals- do you want to live somewhere else, travel the world or open a business? Knowing these goals gives you something to shoot for. Plus, you can divide up your larger goals into small steps to see what progress you’re making.
  • Cut expenses to help save more- if you can downgrade your data plan for your phone and cut back on grocery spending enough to save $70 a month, you’re in business. That $70 put into a retirement account earning eight percent for 35 years leaves you with around $160,000 for retirement. Not bad.
  • Build up your emergency fund- this may seem counterintuitive. However, it allows you to keep making contributions should your income decrease. Shoot for six months’ worth of living expenses.

 

Okay, so now that you know you need to start now, your goals, have cut back on your expenses and built up your emergency fund, it’s time to fund your retirement. There are two primary options:

  1. Employer 401(k) - these allow for easy pre-tax contributions. You should take advantage of these if available, especially if there is any kind of match from your employer.
  2. Roth or Traditional IRA- these retirement accounts are good options if your employer doesn’t offer a retirement program or you are already hitting the limits for contributions to that plan. Roth and traditional IRAs come with different tax benefits, so be sure to consult your tax advisor to see what they would recommend.

 

The Golden Rule of Retirement Saving: Don’t Dip into Your Retirement Accounts

Once you have money in your retirement account, it shouldn’t come out until you’re retired. Stiff penalties are levied against early withdrawals, so they should only be made in most dire of circumstances.

 

State Bank will gladly help you plan and save for retirement. We offer a variety of investment services, so feel free to contact us today to learn more.

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