Saving Up for Retirement

When you are planning for retirement,
the sooner you begin investing and saving, the better because of
compound interest. Even if you haven’t started saving yet or you
begin late, you aren't alone. There are ways of catching up to
increase your funds during retirement. It isn’t too late to begin.
With a few steps, you can boost your savings to make your golden
years more enjoyable.

Reduce Spending

Look at your budget and see what can be
cut. For example, you might be able to get a lower rate on car
insurance. Bringing your lunch to work instead of buying it is
another way of reducing your expenditures. If you have debt, like car
debt or student loans, now is the time to do something about it. If
you have debt
from school, it’s a good idea to look into student loan
consolidation. That involves combining multiple loans with different
term lengths and rates to one loan. If you have federal student
loans, look into a Direct Consolidation Loan from the U.S. Department
of Education. If you want to reduce your rates from a private lender,
look into student loan refinancing. When you have extra money, resist
the temptation to buy an object or experience. Instead, take a salary
bonus or other unexpected money and put it toward retirement. Plan on
putting at least half toward your goal. If you get a raise at work,
increase the percent you put toward retirement.

Use Your 401(k)

Many employers offer traditional 401(k)
plans, and if you’re eligible, you can put pre-tax funds toward it.
This can be a significant advantage. For example, perhaps you are in
a 12 percent bracket and want to put $100 from each paycheck in. But
since this is pre-tax money, your take home pay only drops by $88
instead of $100. Of course, you’ll still have to factor in
Medicare, Social Security, and any local taxes. Still, it lets you
invest
more without hurting your budget. It’s a good idea to research
what your employer offers. Some might offer Roth 401(k) plans which
use after-tax income instead of pre-tax money. Think about your
potential income tax bracket during retirement to see if this is a
good option.

Get an IRA

Consider opening an individual
retirement account (IRA) to increase your long-term
nest egg. There are a couple of options. For example, a
traditional IRA might work depending on whether you have a strong
retirement plan. When you contribute to a traditional IRA, the
contributions might be tax-deductible. Your earnings can then grow
until you withdraw from the account when you are retired. Your
phased-out income limits are based on your filing status, and if you
meet them, looking into a Roth IRA might be a good option. Your
after-tax dollars fund them, but after you have turned 59 and a half,
your qualified distributions are free of federal taxes. Qualified
distributions include earnings, and they might also be free of state
taxes if you meet certain holding period requirements.