The good news is that there are steps he or she can take to increase retirement savings. Below are some useful tips on how to boost retirement savings.
1. Focus on Beginning Immediately
It is advisable for someone to start investing as much as possible at the moment. This is especially the case if he or she is just starting to put some money aside for retirement. This way, compound interest will get to work for them. Compound interest is the ability of an individual’s assets to generate earning that will then be re-invested in order to generate their own earnings. The more a person can invest at a young age, the better off he or she will be.
2. Open an IRA
A person can consider opening an IRA (Individual retirement account) to assist in building his or her nest egg. There are two options to choose from: traditional IRA and Roth IRAs. Traditional IRA may be suitable for someone depending on their income and whether the individual and or/or their spouse have a workplace retirement plan.
Contributions made to a traditional IRA can be tax-deductible, and the investment earnings have a chance to grow tax-deferred until the account holder makes withdrawals during retirement. Roth IRA is recommended for someone who satisfies the income eligibility requirements. It is funded with after-tax contributions. This means once the account holder turns 59 � years old, qualified withdrawals may be federal tax-free if he or she has had the account for not less than five years.
3. Contribute to 401(K)
If someone’s employer offers a traditional 401(K) plan, the individual can contribute pre-tax money; something that can be significantly advantageous. It is possible to invest more of someone’s income without feeling it that much in his or her monthly budget. An employer may be offering a Roth 401(k) option that utilizes income after taxes as opposed to pre-tax funds. If this is the case, the individual should consider what his or her income tax bracket will be during retirement to help in deciding whether or not it is a good choice.
4. Capitalize on Catch-Up Contributions if Aged Over 50
Among the reasons why saving as early as possible is important is because annual contributions to 401(k) plans and IRAs are limited. On the bright side, once someone reaches the age of 50, he or she is eligible to go beyond the usual limits with catch-up contributions. This means if someone has not been able to save as much as desired over the years, catch-up contributions can assist in boosting retirement savings.
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- Thomas Nelson
- Dave Ramsey
- Publisher: Thomas Nelson
- Prime Video
Last update on 2020-03-19 / Affiliate links / Images from Amazon Product Advertising API
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