If you’re having trouble deciding the best way to save for retirement, you aren’t alone. Preparing for this next stage of your life can feel daunting and confusing. It can be difficult to even know where to start. Luckily, there are some resources out there that can give you the tools you need to prepare your finances and investments. Retirement planning advisors can be a great resource to help you identify future risks and set your financial goals.
Why should I save Money for Retirement?
The sad truth is the social security you receive in retirement is typically not enough to live off of. While it can seem easy to put on the back burner, choosing not to save for retirement can cause severe financial insecurity later in life. This can even lead to you rejoining the workforce just to make ends meet. Those who save up in advance typically find greater financial comfort in their personal retirement accounts and almost immediate tax benefits. Overall when it comes to retirement, it’s essential to think ahead. No one wants to put in the work to retire only to be forced out of it when their funds run out. Saving as early as possible will better ensure that you have the money to last you through your years in retirement.
How Much Money Do I Need to Save
A popular budgeting guideline is that at least 20% of your income should go into your savings. This means you’ll need to save roughly around 25 times your annual spending when you hit retirement age. Using a financial plan advisor can help you calculate if you are on track for retirement and what more you need to save up to accomplish your goal.
Retirement Savings Account
If you are looking for how to save for retirement, these savings accounts are created specifically for that purpose. Individual Retirement Accounts (or IRAs) are a type of account created by the IRS to offer tax benefits when used for retirement purposes. This allows your investments to grow without being taxed by the IRS, which is a great incentive to help you build up your savings for your retirement plan. These retirement savings accounts come in a few varieties, so research which one is best for you with your retirement or financial advisor.
Roth IRA is a savings account that offers tax-free growth and withdrawals during retirement as long as certain requirements are met. While there are no tax deductions in the contribution year, Roth IRA rules state that as long as you are 59 years or older and have owned your account for a minimum of five years, the tax-free benefits will apply to you from then on. This means you can withdraw your money whenever you want to, and you won’t owe any federal taxes.
If your tax rate will be lower in the future, Traditional IRAs may be the retirement savings account for you. With Traditional IRAs, you won’t pay taxes on your money even in the contribution year. While your withdrawals and deductions are taxed, you’re able to invest more upfront than in other IRAs.
A 401K is a retirement savings plan that is sponsored by an employer. These plans typically offer significant tax benefits while helping you plan for your future. The employer will set a certain percentage to automatically be taken out of each paycheck and invested in the account. The benefit of this savings option is that the investments are made on autopilot and that many employers will have extra perks for those who choose to participate.
How to Save Money While on a Budget
Saving for retirement while on a budget is possible, and there are resources out there to help you. Getting an IRA, especially a 401K if your employer offers it, may be a way to start generating some tax-deferred investments. Even without a 401K, setting up automatic contributions to a retirement plan may potentially help you contribute to your retirement in an easy, and painless way. After all, it’s typically much easier to save money when you don’t have the opportunity to miss it. Cutting down on big expenses is also a good tip when it comes to saving for retirement. If possible, you could also try finding a side job or any part-time work to build up more income. Financial plan advisors will also strive to help you plan for retirement while still sticking to your budget.
When Should I Start Saving for Retirement
The simple answer to this question is to start saving as early as possible. If possible, financial advisors recommend you start saving for retirement in your 20s. This way you can have decades to build up the necessary funds. Start small; little by little you’ll have the chance to see your retirement plan take shape. But while it is best to start young, always remember that it is never too late to begin saving for retirement. Even if you’ve delayed saving for many years, always remember that there are resources and advisors out there ready to help you.
How to Make Catch-Up Contributions
Once you reach the age of 50, you can start to make catch-up contributions. To begin, you’ll need to contact your plan administrator or access your account online. You can change the amount you want to contribute, but usually, all catch-up contributions must be made to your IRA by the end of the year.
Saving for retirement involves a lot of money, preparation, and patience. That being said, there are tools that may help you make retirement planning go much more smoothly. With the help of retirement savings accounts, cutting down unneeded expenses, and catch-up contributions, you may also learn how to save for retirement. Oxford Advisory is dedicated to helping others achieve their ideal retirement and aims to help in any way we can. Our financial plan advisors are here and ready to assist. Visit https://oxfordadvisorygroup.com/financial-services/retirement-planning-services/ to learn more about how to save for retirement today.
This report was prepared by Oxford Wealth Group, LLC, a federally registered investment adviser under the Investment Advisers Act of 1940. Registration as an investment adviser does not imply a certain level of skill or training. The oral and written communications of an adviser provide you with information about which you determine to hire or retain an adviser. Form ADV Part 2A & 2B can be obtained by visiting https://adviserinfo.sec.gov and search for our firm name. Neither the information nor any opinion expressed it so be construed as solicitation to buy or sell a security of personalized investment, tax, or legal advice.
This is prepared for informational purposes only. It does not address specific investment objectives, or the financial situation and the particular needs of any person who may receive this report.
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