Retirement is something every working man or woman must face eventually, it is more like a part of the cycle of life. Therefore, it is of prime importance to have sufficient retirement savings to help you make it comfortably through your retired life. Have you started your retirement savings yet? If no then we have some great tips for retirement savings:
- Start saving Young:
Don’t wait for your retirement age to be near in order to start saving, you should work out a plan and start your savings while you are young. The benefit is that by the time you reach your retirement years, you will have sufficient amount of money and you wouldn’t even have to feel the burden. In other words, save young, retire rich.
- IRA and Roth IRA:
IRA stands for Individual retirement account or Individual retirement arrangements and happens to be a smart decision for people who are planning their retirement. On Traditional IRA, your contributions will be tax-deducible, all transactions and earnings within IRA will be tax free, and will only be taxed when you take the amount out after retirement.
To get more benefit from IRA choose Roth IRA. If your income, however, is high enough to be considered ineligible, then there’s a back door for you as well. Opening a traditional IRA is going to be more suitable for you in this case as there is no income standard for this, and once your funds clear out, you can convert it to Roth IRA, and as long as you abide by the withdrawal guidelines you can compound funds for the future and withdraw them as tax free.
- Company match 401(k) or 403 (b) :
If your workplace offers a company match, then you must contribute to the amount that the company kicks in. This is an important tip because you can get free money from your employer, for example, if you earn 50,000 per annum and you contribute 5% of this annually, that is, 2,500 so your employer will also add 2,500 per annum to your account. So the more you contribute to your saving the more money you’ll get.
- File for Middle or lower income Retirement savings:
If you are married and opening a joint savings account, then this strategy is very useful as you can claim up to 50% of the tax credit on your retirement plan’s input. The maximum amount of tax credit/ couple is 2,000 and the individual is 1,000, but this depends upon your income and amount of contribution.
- Retire in the right State:
Some of the states are retiree friendly they include; Florida, Texas, Nevada, Wyoming, South Dakota or Washington. These states claim ‘no state income taxes’ so choosing one of these states is a good place to retire. Most states don’t tax social security which is also very fortunate for the retirees.
- The age advantage:
If you feel like you haven’t saved up a lot but you are 50 years old already, than you are at an advantage because now you can go beyond the normal limit catch up in your IRA or 401 (k). This can help you a lot in boosting up your savings.
This article has been reviewed and approved by Thomas A. Moore, managing attorney Brownstone Law Group, PC. California Bar # 148698. This article is for informational purposes only, does not provide legal or tax advice of any kind or form any type of attorney/client relationship. This article was published on July 1, 2015
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