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Starting Your Retirement Saving Late in Life: Top Tips for Maximizing Your Savings

October 31, 2017 By Administrator

You’ve spent a lot of your time working towards a good career and saving as much as you can, but when you go to balance out all of your accounts, you realize your retirement savings are skimpier than you planned.

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You should know that you’re not alone in this feeling. In a Financial Times report, Forbes indicates that at least 45% of Americans don’t have retirement savings. People aren’t saving enough, and it might be that they don’t have the resources or education to do so.

It’s never too late to start saving, regardless of the financial stage of your life. Through some easy strategies you can do for yourself or alongside the advisement of a financial professional, you can find comfort in building a solid retirement plan.

Take a look at some of these top proven tips to help you get started towards a happy and comfortable retirement.

 

1. Open and Contribute to a 401k

It’s a good idea to open a 401k with your employer. Typically, your employer has this option available.

One of the biggest advantages is that you can contribute directly from your paycheck. The contribution is always made pre-tax, making your gross income lower for tax purposes. This might place you in a lower tax bracket, helping you pay less in taxes.

A 401k is a common retirement plan and allows you to set money aside without being able to access it easily. If you’re unsure about the specifics and guidelines of a 401k, contact a professional financial advisor or your plan administrator, to help you with the process. Often the plan administrators have basic online tools you can use to give you an idea of how much you should be saving and the type of investments you should be putting your money into.

 

2. If Your Employer Matches Your 401k Contributions, Put in the Max Amount

Another reason to open a 401k with your employer is that your employer might offer to match your contributions.

Typically, employers will contribute up to about 50% of an employee’s contributions. So, if you contributed $5,000, your employer would automatically match and give you an additional $2,500. That’s free money that you don’t want to leave unclaimed!

That amount can easily add up each year when it comes to saving for your retirement. The best thing about it is that you don’t have to work extra for that additional money, just simply add in your contributions with your employer.

 

3. Depending on Your Age, Look Into “Catch-Up” Contributions

Advantages of contributing early into IRA and 401k accounts is that you’ll be able to capitalize on the interest and employer contributions early on. But, if you didn’t get that early start, you may feel as though you have lost out on some of those benefits.

However, for people over the age of 50, you can “catch-up” in terms of contributions. You’re able to maximize your savings by putting in at a later stage. There are limits on these contributions, though, so be sure to investigate all the guidelines associated with these benefits thoroughly.

There are options out there for “late-bloomers,” so be sure to check out the strategies that are available to you. You don’t want to miss out on an opportunity that allows you to save money after you weren’t able to do so in earlier stages of your life.

 

4. Activate Automated Transfers to a Savings Account

You may have heard the phrase, “Don’t place all your eggs in one basket.” Financially speaking, this is a great motto. You don’t want to rely simply on just one method of savings.

In addition to your 401k, it would be wise also to set aside other savings accounts that you manage. It’s also a good idea to set up automated transfers into those savings accounts.

Some banks also offer customers ways to round-up their transactions to the nearest dollar from their use of debit and credit cards. Those rounded amounts go directly into your savings and will add up over time. You can also set up automatic transfers of specified amounts each month to maximize your efforts.

 

5. Set Goals and Expectations

Before you can begin to decide how much you need for retirement, you want to determine your vision of retirement. Do you want to travel the world? Do you want your mortgage to be paid off?

Whatever your goals might be, it’s important to set those expectations so that you can plan for them accordingly. Having clear expectations is a good way for you to build a plan and make it more likely that you’ll meet those goals.

In the end, you’ll feel that much more accomplished and happy knowing that you met the financial goals you worked so hard to attain.

 

6. Create a Practical Budget

While you’re continuously saving, it would be best also to have a practical budget that aligns with your savings goals. This would be a good time to look over certain bills to see if you might be able to get them lowered.

For example, you can see if you might be able to refinance your car at a lower interest rate. You can also determine items within your budget that are no longer necessary such as large cable bills or subscriptions to magazine services. All of these amounts can add up to a lot of money over time.

These funds can be saved for your retirement rather than being underutilized in the present. You might also seek the advisement of financial planners to help you with coming up with reasonable plans for you and your family. Their ability to guide you through particular family services might serve as a good start towards planning for your financial future.

 

7. Open an IRA

Since it’s advised that you save for retirement in a variety of ways, you can also open either a Traditional or Roth IRA.

Traditional IRAs can be tax-deductible and be taken out of your paycheck pre-tax. Your earnings have the potential to increase, all while being tax deferred. Once you decide to pull from it, then the money will be taxed.

A Roth IRA has income guidelines, but might be beneficial for particular individuals. Contributions are taxed at the beginning, so once you reach retirement age, you’ll be able to pull from it without being taxed.

Both options are solid ways for anyone to get a start on their retirement savings. Go through the specifics of both to determine which may work best for your financial situation.

 

8. Wait as Long as Possible Before Claiming Social Security

Americans can begin to officially retire and claim Social Security benefits at the age of 62. However, for every year an individual waits, he or she can increase the benefits that he or she receives. You can delay this every year until you reach the age of 70.

Each year that someone waits to claim benefits can add up to about $1,000 more a year. The difference between someone who retires at the age of 63 versus someone who retires at the age of 69 can mean a difference of $10,000 per year! So, if you can manage it, delay your time to retire as long as possible so that you may maximize the amount you receive from Social Security.

 

9. Put Away Extra Money

With all the new apps and advancements in technology, developers and financial business people know that setting aside extra money is a good way for people to save for their retirements.

Apps like Stash or Acorns allow people to link their bank accounts to personalized portfolios. These services will round up your transaction amounts or enable you to set aside specified amounts into a portfolio that they use to invest in diversified stocks. For those who aren’t very familiar with stock investments, this is a great way to start investing.

You can also stash away money on your own. Each time you get a bonus at work or receive tax refunds, you can place these funds aside since it was not part of your original monthly budget. Over time, these types of savings can begin to add up.

 

10. If You Veer Off the Path, Just Get Back On

If saving money were an easy feat, then everyone would be doing it. It’s important for you to remember that, sometimes, you may not always make the soundest financial decisions. What’s more important is to remember that you can always get back on the horse.

Keep focused on what you want to save for retirement. You know that it will require some sacrifices now, but the benefits will be that much more rewarding for you when you reach retirement age. There will be bumps in the road, but those are only temporary.

 

Conclusion

You don’t have to feel discouraged just because you haven’t started saving for a fruitful retirement. There are still ways that you can maximize your earnings by following these proven and helpful tips. Once you’re aware that you need to be saving now, you can come up with a feasible plan to reach your retirement goals.

Not sure how to get started? Contact a professional and experienced CPA to help you with developing the ideal plan for your future. 

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