Budget to Save for Retirement
If I could tell you to create a budget every time I wrote a post, I would. This is priority number one. Figure out how much you make. Track your spending. Then find out where you are at the end of the month. Trim spending where you can and make sure you save to your designated accounts at the start of the month. This forces you to save before you spend any money, instead of saving what’s left over.
Live Below your Means
Living with less will simplify your life and help you save more money. By spending less on things and nights out, you have more to put away for retirement.
Pay off Debts
Make paying off debt a priority. By getting rid of nagging debts, you can put more money aside for retirement, and will also save money on interest payments. Win, win.
Save for Emergencies
Saving money for emergencies is an important step in your retirement saving process. Having this money available is a much better alternative than putting the emergency expense on a credit card, and in turn, wastefully paying interest.
Start to Save for Retirement Early
Time is one of the most effective tools in your retirement savings arsenal. By starting early, you give your money more time to compound and work for you.
Catch-up on Your Savings
If you weren’t able to save in your early working years and are looking at low retirement savings, there is hope. Once you reach the age of 50, you are now entitled to a catch-up contribution. For an IRA, this is an extra $1,000 per year. For a 401(k), this is an extra $6,000 per year.
Take Advantage of Your Employer Plan
If your employer offers a retirement plan, take full advantage of it. If they offer a match and money is tight, do whatever you can to get the match. You don’t want to miss out on free money. Try and increase the percentage you save every few months or every year.
Do what you can to maximize your contributions. If you have a 401(k) with your employer, the maximum you can put in for 2017 is $18,000 ($24,000 for 50+). If you have a SIMPLE IRA with your employer, the max you can contribute for 2017 is $12,000 ($15,000 for 50+).
The money in these accounts is contributed pre-tax and will be taxed when you start withdrawing during retirement.
Save for Retirement With a Roth IRA
If you maxed out your employer plan contributions and can still afford to contribute more, use a Roth IRA. There is, however, an income cap. If you make too much you won’t be eligible to contribute. There is still a backdoor method to contribute. The benefit to a Roth is the money you withdraw during retirement will be tax-free. The maximum contribution for 2017 is $5,500 ($6,500 for 50+).
Use Investing Apps
There are numerous amounts of apps and programs available to simplify investing. Acorns, for example, is a great app that will round up your purchases to the nearest whole dollar and invest the difference in an Acorns investment account.
There are a lot of ways that you can help your retirement savings. Creating a budget, paying off debts, and limiting your spending are great steps in this process. By taking these steps, you free up extra money to set aside for retirement. You also have a number of retirement savings vehicles and investment products to help you in his journey.
Note: Please consult with a financial professional for advice regarding your personal situation. Do not make decisions based solely on what you read or hear.
Photo: Tax Credits