Saving Up for Retirement at Any Age
No matter your age, it is important to start saving for your retirement years. Everyone will face this time at some point, so it is best to be prepared. Understanding the strategies for retirement planning will help you put aside as much money as possible.
Paying Yourself First
You might have heard that you should pay yourself before paying for anything else. That means you have a portion of your paycheck set aside automatically before you pay rent or buy groceries. By making the contributions automatic every paycheck, you can grow the amount you have set aside without needing to think much about it. Your employer might offer this, or you might get something set up with your bank account. If you need some funds to set up an account, you might consider selling your life insurance policy for cash. When you sell your policy, you can receive funds that can then be used for your retirement.
Another way to fund the account is to reduce your spending. Look over your budget to determine what areas you can cut out. For example, perhaps you will decide to borrow movies from your local library instead of paying for a subscription service. Or you might start shopping the sale ads and using coupons for groceries and household products.
Meet Your Company Match
If your employer offers a 403(b) or 401(k) with a company match, it is important to put in as close to the limit that they contribute as possible. It prevents you from leaving free money on the table. And if you can, try to contribute as much as is allowed by law. That way, you can get the greatest financial advantage later on. By saving for retirement early you are also creating the habit of putting money towards this goal so you will not have to learn a new way of budgeting as you move closer to the period of retirement itself.
Retirement for Self-Employed
Even if you only have a side gig, you can make your self-employment income work for you when it comes to retirement savings. You can contribute to a sole 401(k) or even a Simplified Employee Pension plan. You are allowed to contribute several thousand dollars every year, so you might want to try to take advantage of that. If you are over the age of 50, you are allowed to contribute even more, since it is designed to help people catch up on their savings goals.
Opening an IRA
You can also consider opening an IRA to increase your savings even further. You could choose a traditional IRA, depending on whether you already have a retirement plan with your employer and your income. You can sometimes deduct the contributions you make to a traditional IRA, and you can often allow the investment earnings to grow, without having to pay taxes on those until you take them out. There are also phased out income tax limits, which you can find on the federal tax filing status, and if you meet them, you might find a Roth IRA is a better choice. You will fund them with money you have already paid taxes on, so the distributions will be made free of taxes as long as they are qualified.