Many Americans don’t feel like their retirement savings are on track. If you’re one of those people, have no fear—we have some tips to help you get your retirement savings back on track. Let’s take a look.
Contributing to a 401(k) Plan for Maximum Match
Any advisor worth their salt will rightly tell you to contribute as much as possible to your employer’s 401(k) plans and maximize the employer match. A 401(k) plan is an employer-sponsored investment account that allows you to save and invest money for retirement without paying taxes until you withdraw the funds. Your employer may offer a matching contribution up to a certain amount, so it pays to contribute as much as possible to take advantage of this free money.
Increasing Contributions Annually and Utilizing Raises
Advisors also recommend increasing your contributions annually by 1-2% each year or utilizing any raises or bonuses you receive from work. This allows you to increase your contributions slowly over time rather than trying to “catch up” all at once. It also helps ensure that your contributions keep pace with inflation and other factors that can affect the value of your investments over time.
Utilizing Roth 401(k)s and IRAs for Added Tax Advantages
Finally, look into Roth 401(k)s or IRAs if your employer or financial institution offers them. These accounts offer tax advantages such as tax-free growth and withdrawal of funds after age 59 ½ without incurring penalties or taxes on withdrawals. They also allow investors more flexibility when it comes to withdrawal options than traditional 401(k)s do, making them an excellent choice for those who want more control over their retirement savings strategy.
Reviewing Stock and Bond Allocations Regularly To Maintain Balance
In addition, regularly reviewing stock and bond allocations to maintain a balanced portfolio with adequate exposure across different asset classes, such as stocks, bonds, real estate, commodities, etc., is highly recommended. Rebalancing ensures that these allocations remain consistent over time so that your investments continue working hard for you despite market fluctuations. This ensures that you have an appropriate mix of assets while reducing risk through diversification.
Avoid Cashing Out from 401(k)s Upon Leaving Jobs
Lastly, when leaving a job, resist cashing out from your 401(k) because this will incur hefty taxes and penalties that could otherwise be avoided if the funds were left in the 401(k). There are better ways, such as rolling over the funds into another qualified retirement plan or IRA, where they can continue growing tax-deferred until withdrawal at age 59 ½.
Conclusion: Retirement planning is an essential step towards a secure financial future; however, many Americans need help with where to start when it comes to saving for retirement. With these valuable tips, such as contributing maxing out contributions into employer-sponsored plans, utilizing Roth accounts for added tax advantages, and avoiding cashing out from 401 (K), individuals can quickly get their retirement savings back on track and easily. By following these strategies consistently throughout their careers, individuals can reach their financial goals faster while enjoying peace of mind knowing they will have enough money saved when they reach retirement age.
Many people have learned about the power of using the Safe Money approach to reduce volatility. Our Safe Money Guide is in its 20th edition and is available for free.
It is an Instant Download. Here is a link to download our guide: