Although you’re still of good working age, you should already be preparing for your retirement. However, this topic is often brushed off by most people since they don’t know how to start planning for it and what investment strategies will lead to a more fulfilling retirement. So, it doesn’t matter if you’re just starting out or at the top of your game — you should consider saving and investing for retirement right now!
Before following the tips listed on this article, you should be open to making investments and learning about the basics like reading a guide on precious metal investments. Doing so will help you make more informed decisions when you’re investing, and you’ll have a better chance of seeing growth. The proceeds from your investments can then be used to grow your investment fund or personal savings.
Strategies That Can Help You Save For Retirement
Saving for your retirement is hard if you haven’t mastered the basics, such as knowing the different types of savings accounts for retirement, benefits that can help you save, and the things you should avoid.
Here are some of the best retirement investment tactics you could take advantage of right now:
Make Regular Contributions To Your 401(k)
You’re very lucky if you work for an employer who sponsors a 401(k) plan as around 40 million Americans don’t have access to itmost of them are either self-employed or new hires. Investopedia defines a 401(k) as a retirement account supported by employers that also comes with tax benefits. It’s also very easy to make contributions as your employer can employ a system called automatic payroll deduction, which also lowers your overall taxable income.
So, you need to try to contribute a certain percentage of your paycheck regularly. Also, if you’re required to meet a minimum to qualify for employer matching, you need to contribute more as much as you can. For 2020, the IRS has set the contribution limit at $19,500 not only for 401(k) but for 403(b) and other plans as well.
If you’re already over 50 years old, you can take advantage of extra catch-up contributions of $6500 to beef up your retirement fund. But you need to keep only one thing in mind: don’t touch your 401(k) accounts before you reach your retirement age! Making premature withdrawals will not only jeopardize your retirement investment strategy, but you will also be taxed heavily.
Open A Roth IRA Or IRA If 401(k) Is Not Offered By Your Employer
As stated earlier, many people in the workforce don’t have access to 401(k). If you’re one of those people, you have other options to save for your retirement. An individual retirement account (IRA) has almost the same benefits as a 401(k) as it is also tax-free and has tax-deductible contributions.
Also, there are several forms of IRAs you can invest in, such as the precious metals IRA that’s very good at protecting assets in times of market volatility. But the downside is that you need to create and maintain this account individually or with the help of private financial institutions like brokerage firms or banks.
If you prefer to make tax-free withdrawals when you reach retirement age, you should go for a Roth IRA. This type of retirement savings account is different from a normal IRA that requires after-tax contributions. Once you’ve deposited your contributions in a Roth IRA, your savings will grow without getting taxed. With normal IRA accounts, you’ll be taxed when you make withdrawals, but not when your money is still in your account.
Both options have their fair share of pros and cons, and both are instruments you can use for your retirement funds. It all boils down to what your goals are when you reach your retirement age.
Create A Health Savings Account
Let’s face it; it’s not easy getting old because you’ll inevitably have more health problems at that point in your life. So, your health expenses will naturally increase as you get older. An average couple in their early to mid-60s who have reached their retirement age today is expected to pay around $285,000 to cover their medical and healthcare expenses. You might think that this is too expensive, and you’re right about that. Thus, you need to take all the necessary measures to prepare for your retirement.
Setting up a Health Savings Account (HSA) is one of the best ways to prepare for the health expenses you’ll incur in the future. These are comparable to 401(k) plans, but they’re only meant for healthcare expenses. The contributions you’ll make for these plans are tax-deductible, and the earnings it will make are tax-free. Also, the withdrawals that will be made in the future are tax-free only if they’re spent to cover medical expenses.
Purchase A Fixed Annuity
Thinking about having your savings outlive you can make a lot of people anxious. But having poorly performing retirement investments is surely going to stoke greater fear. So, you need to protect yourself from risk and hedge. You could do so by investing in a fixed annuity which will ensure that you’ll have the same income for a set period. But how soon you’ll receive your earnings and how long it will last will depend on the type of fixed annuity you will purchase.
Make Use Of Saver’s Credit
If you can avail of a tax credit, there’s no reason to refuse to take advantage of it. Depending on your adjusted gross income, you may be qualified for a tax credit if you’re making contributions to your IRA or 401(k). By using these tax credits, you can significantly reduce your income taxes annually.
Aside from that, you can receive $1000 if you’re single or file individually, while the amount goes up to $2000 if you’re married and file jointly. You can receive these tax credits depending on your contributions, so it’s a good reason to start setting aside a larger portion of your paycheck toward your retirement funds.
Closing Thoughts
Gearing up for your retirement can be challenging and will take a lot of time, money, and effort. But it will pay off when you reach your retirement age since you’re already prepared for all of the obstacles you’ll encounter in your golden years. It will also make your retirement a lot more fulfilling since you can afford to cover your necessities, medical expenses, and the things you want to do.
So, by saving up for this stage of your life earlier, you’ll be spared from all the anxiety and disappointment that will ultimately result from not having a retirement investment plan.
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