Retirement Accounts Archives

Saving for Retirement

Saving and investing for retirement is no easy task, and the sooner you start the better off you will be later on down the road. The power of compound interest, and years worth of incremental savings will help you achieve a sound and comfortable retirement that will stay with you the duration of your life. You don’t want to save for years, retire, and then after 20 years you find that you are running out of money and need to return to work! Make sure you employ a sound retirement strategy that grows and adapts with you as you age.

First things first, if your employer offers a retirement account then you need to take advantage of it. Often times employers will offer a contribution match, and giving up that match is like giving up free money. If possible you should not only take advantage of the match, but also max out the account so that you can receive the full tax benefits as well. Too often people fail to consider the consequences in passing up these employer sponsored retirement plans.

Now that you are maxing out your employer sponsored plan you can start to invest in other retirement accounts. Other common types of accounts are SEP IRA’s, traditional IRA’s, Roth IRA’s, and now they even have a Roth 401k. There are so many options to choose from that it’s best to research each one as they all come with different investment options and tax benefits.  As someone who runs a side business I am eligible for a SEP IRA, but that’s something that average employee isn’t eligible for.  Make sure you talk to a retirement professional so that you can make sure to choose the right type of account for your situation.

Tax-deferred retirement accounts are a great way of saving, but they shouldn’t be the only way.  Opening an online brokerage account is a great idea so that you can take advantage of low cost ETF and mutual funds. These funds are a great way to balance the allocation of your portfolio, while at the same time keeping your costs to a minimum. Guarantee investment certificates is another place to store some of our money. What is a GIC you ask? It’s a very low risk investment that offers you a guaranteed rate of return over a specified period of time. The rate of return can vary depending on the term length,  and some are even based on a specific market index.

Regardless of how you decide to save and invest that important thing is that you start as soon as possible. The sooner you start the better off you will be in the end.

If you are 50 years of age or older, and you still haven’t put away a substantial enough amount of money for retirement (or possibly nothing at all) you may think that it’s too late for you to start saving and that you’ll have to “work forever” in order to survive.

While it certainly is going to be a bit tougher, there are a number of things you can do if you start right now that will allow you to have a significant bit of money set aside at age 65 so that you can stop working and enjoy a moderate lifestyle. Keep reading to find out more.

Make savings your first priority

Simply put, making savings your top priority is a definite must. If you have the financial means, and a 401(k) retirement plan, if you save $23,000 over the next 15 years (assuming that you’re 50 now) you would have approximately $570,000 when you turn 65 based on a 6% interest rate. If you don’t have a 401(k) then you definitely need to open an IRA ASAP.

Don’t forget the 25 Times Rule

This rule says that, based on what you need in supplemental income for one year today, you’ll need 25 times that amount of money by the time you retire in order to stay at your existing lifestyle. For example, if you use $40,000 in one year now, by the time you reach 65 you’ll need to have $1 million saved in order to be relatively secure in retirement. In order to reach these aggressive goals there are investing strategies like binary options that can help you along the way.

And don’t forget the 10% Rule either

This rule, more or less, states that if you start saving when you’re in your 20s you should save approximately 10% of what you earn for retirement. For every decade that you wait to start saving, you need to add another 10%. So, if you start in your 30s you should save 20%, in your 40s you should save 30% and, by the time you reach of 50s, 40% of what you’re earning should be put aside for retirement if you’re just getting started.

Put money into a healthcare savings plan as well

Yes, people are living longer these days but that also means, when it comes to healthcare, they’re spending more for health related problems. In order to make sure that you don’t decimate your retirement savings because of a healthcare crisis, starting a separate savings account for health, or making sure that you have plenty of health insurance, is vital.

Long-term healthcare insurance is probably one of the most important types of insurance that you can have once you reach your 50s or older. Medicare only covers about 60% of your healthcare costs by the way, and is deducted from your Social Security benefits, so having a supplemental health insurance account is extremely important.

Those four tips alone should help you to get started on your retirement savings right away if you’re 50 years old or older. The one most important piece of information to keep in mind is that, since you started late, you’re going to need to work extra hard and save as much as possible to “catch up”.

It can be done, and people are doing it, but don’t be fooled into thinking that it’s going to be easy. If you want to be able to enjoy at least a few of your “golden years”, the time to start saving is right now.

 

2013 has come and gone and now that we’re in the new year many people think it’s too late to put money into their retirement accounts and get the tax savings that they can bring. The truth is however that contributions to several different kinds of retirement accounts for 2013 can be made right up until April 15, 2014 and, when you file an extension, even later.

For example, the IRA contribution limit for 2013 is $5500 and, if you’re over 50 years old, you can put in an extra $1000. This can be in a “regular” IRA or in a Roth IRA or if you want to you can split the funds between the two as long as your contributions don’t exceed $5500 or $6500 respectively.

If you don’t mind waiting through a ton of legal mumbo-jumbo, IRS publication 590 has a lot more details about what you can and can’t contribute to your IRA. It’s complex, to say the least, so talking to your accountant or another financial expert is probably a good idea. Additionally there are a number of  tax filing companies like TurboTax that have online programs and calculators that will help you to determine what is the best way to do taxes if you’re self-employed and maximize your deductions, contributions and tax savings.

In brief, here are the 3 kinds of retirement accounts  to which you can still make contributions for 2013 if you’re so inclined.

  1. Traditional IRA. The deadline for this one is either April 15 or whatever the actual day is (before then or after, if you have an  extension) that you actually file your taxes. Additionally, you can open an IRA account up until that time if you haven’t done so already.
  2. Roth IRA. The rules here are exactly the same.
  3. SEP IRA. This is a Simplified Employee Pension plan and can be used by someone who’s self-employed or has their own small business. You can contravene to this type of account up until the maximum extension time which is October 15.

So, as you can see, contributing to your IRA is definitely still possible to get your  tax credits for 2013. If you have any other questions about contributing to an IRA or retirement fund, or questions about personal finance and general, please let us know will get back to you ASAP with answers and options.

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