Guest Post by Lilian Lewis
Are you about to retire? How are you preparing for it?
Perhaps you have already retired.
Having a retirement plan to accomplish your later life goals is the ideal course of action to take. However, if you haven't adequately prepared for this eventuality, it's never too late.
The financial moves you make in your last 5 - 10 working years can make a difference in your life.
What financial moves can you make to increase your savings or investments to boost your retirement package? Let us explore a few ideas to get you back on track.
- Automatic saving plans are best
The fact that you should save for retirement is evident to many of us; the problem we face is saving money consistently due to the many obligations competing for our income, including mortgages, college payments, among many other responsibilities.
Surmount this problem by creating an automatic saving system that deducts money from your salary every payday and sends it to a retirement plan of your choice.
- Determine your retirement needs
According to pension experts, most people require a minimum of 70 percent of their pre-retirement income to live. This is money for daily needs, like housing, food, and health expenses.
Determine how much you have put away already and to determine how far along you are.
That will help you to find out how much more you can put away to increase your savings. It will also show you when these savings become vested so that you know they are fully available to you.
- Start saving retirement money in IRAs
IRAs offer attractive tax advantages for savers that will make it worth your while. You can choose from two varieties: traditional IRA accounts and ROTH IRA accounts.
The money you save in traditional IRA accounts is pre-tax, while ROTH IRAs get you tax breaks in the form of tax-free withdrawals.
The maximum amount of money you can contribute to an IRA account if you are over 50 is $ 7,500. That's a standard $6,500 contribution and an extra $1,000 for people 50 years and older.
Married couples can contribute savings to two IRAs if they file their taxes jointly through a spousal IRA savings plan. This is a great way to create a comfortable nest egg for your old age with your spouse.
- Use financial retirement tools
There are many savings tools that we can use to put aside money for our later years including 401 (k), 403 (b), and 457 savings plans, which are not subjected to tax until you withdraw.
These are workplace savings plans that you can fund to the max. People under 50 can contribute up to $23,000 to a 401 (k) plan annually. If you are over 50 years, you may add $7,500 to this standard amount as catch-up contributions.
- Social security retirement benefits
The amount of social security benefits you can get is calculated based on your average indexed monthly earnings (AIME). These calculations are done during your 35 highest-earning years.
You can start getting money from your Social security fund typically from age 62, but you will receive your maximum benefit if you wait until age 70. The benefits from your social security can make up as much as 40 percent of your pre-retirement income.
Therefore, make sure your social security documents are up to date and follow the rules concerning this scheme to secure your social security benefits.
- Talk to retirement investment experts
You will find retirement experts in many financial institutions, be it banks, labor unions, government savings organizations, and even the human resources/financial section in your workplace.
A retirement expert can help you explore other options to diversify your savings including blue chip stocks, government bonds, certificates of deposit (CDs), and real estate investments.
Document everything that you have invested in by drawing up a will. This ensures all your loved ones are well cared for in case of your demise or incapacitation. Get legal counsel to assist you with this.
Final thoughts on what to consider when planning for retirement
In summary, here's what to focus on for your retirement:
- How much money do you need to retire comfortably?
- How much interest would you like to earn from your retirement savings yearly?
- Which retirement savings options are available to you?
- Are there other ways to save money for your later years?
- Are you prepared for accidents, death, or incapacitation in your later years?
Remember, there is no limit to what you can save for retirement. Aim to set aside the highest amount you can.
Lilian Lewis is a writer who works closely with New Jersey Law firm, Aiello Harris. When not hunched over her computer writing on various legal matters, you can find her baking all sorts of goodies, and hiking the local trails to work off the goodies.
Photo by RODNAE Productions, pixels.com