Saving for retirement is simple, but not necessarily easy. It’s easy to put off accumulating money for your golden years, particularly when you’re young. That said, once retirement is around the corner, you’ll wish that you started saving earlier.
To help guide you through the process of retirement saving, we’ve outlined several helpful tips below.
Take Advantage of 401(k)s
Investing in a 401(k) is one of the best ways to accumulate retirement savings over a long period of time. Oftentimes employers offer a 401(k) match where they partially or completely match your contribution for every dollar invested in your account. Companies normally only match up to a certain percentage of your salary, but it’s worth maximizing your earnings accordingly.
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Delay Social Security
Delaying Social Security can substantially increase your level of retirement earnings. After age 62, for every year you delay receiving Social Security benefits, your earnings increase by 8%. That said, your benefits will stop increasing after age 70.
Keep in mind that this strategy doesn’t work for everyone. If you have disposable income prepared to carry you without Social Security, it’s worth delaying it. But if you’re mostly going to rely on Social Security for retirement, you may not want to delay your earnings for too long.
Choose the Right Location
Different states have different retirement income taxation policies. If you live in a state where your retirement income will be taxed significantly, it could be worth moving to a different state where it’s taxed less or not at all.
For example, Alabama taxes retirement benefits as income but exempts Social Security and pensions from tax altogether. In states like Alaska and Florida, there’s no income tax at all, meaning they’re great candidates for preserving your retirement funds.
However, when choosing a retirement location, keep in mind that the cost of living is an important factor. If a state has no income tax but the cost of living is significantly higher than average, it could mean that it’s not worth moving there for financial purposes.
Start Right Now
The sooner you start saving for retirement the better. When you put away even a modest percentage of your income starting from your early 20s, you’ll be set for a comfortable retirement when the time comes.
Additionally, your investments in retirement savings accounts are given more time to grow the earlier you invest. This means you can make riskier investing decisions, given that you have more room to wait for them to pan out.
Automate Savings
It’s difficult to make a habit of saving regularly unless you automate savings. Luckily, most banking apps feature an option to automatically transfer funds to your savings on a monthly basis. This means that you don’t have to worry about it and “say goodbye” to that money every time a new month rolls around.
This ensures that you don’t allow any excuses to talk you out of saving at the beginning of the month.
Conclusion
Regardless of what age you are, retirement savings should be a priority. Just be sure to automate your savings, start as soon as possible and take advantage of retirement savings accounts and you’ll start accumulating a nest egg to support your future in no time. For information about average 401(k) savings by age and a retirement savings timeline, check out the infographic below!
Please include attribution to Annuity.org with this graphic.
