6 Proven tips to boost your retirement savings
When it comes to saving for retirement, the thumb rule is that the earlier you start saving, the sooner you can save enough money for retirement. This is a truth as your savings grows with compound interest.
However, if you have begun saving for retirement late, then no problem. Try to start as soon as possible.
Follow these tips to boost your retirement savings.
Here you go:
Retirement savings tips for individual
1. Focus on saving for retirement right now
Especially, if you are starting late to secure your retirement, then save as much as possible. And, let the savings earn compound interest. To save for your retirement, you may have to revisit your budget to cut down extra cost. It will help you to save more. Also, you can start living a frugal life to lower your lifestyle cost to save more.
2. Open 401(K) account to save
One of the easiest and most popular methods of putting money away for retirement is saving money in a 401(K) account.
401(k) plan is offered by the employers to their employees. In a 401(k) plan, the individual and the employee both can contribute to this retirement fund. In case of Individual Retirement Account (IRA), the individual can contribute to their account that is opened for personal retirement savings. If you start making contributions to the funds for 401(K), then you will receive immediate as well as long term tax benefits. These contributions are deducted from your taxable income automatically and the growth on the account is tax-deferred until you withdraw the money. On top of this, many of these accounts will feature matching company contributions.
3. Open a traditional IRA
You can try for individual retirement accounts (IRA), which offers great tax advantages to you when you are planning to retire. If you choose a traditional IRA, it features growth that is tax deferred, while a Roth IRA does not allow for tax deductible contributions. However, in case of Roth IRA, when the contributions are in account, they are not taxed even when you withdraw them. Thus you should have a good retirement plan, which involves choosing the retirement vehicles that are apt for reaching your goals and complement your capability to make investments.
Retirement savings tips for self employed or business owners
If you are a small business owner, then you also have to save for your retirement days. You should follow these tips to secure the future of your small business and your employees.
Here you go:
1. SIMPLE IRA plan for employee participation in contributing money
This plan offers fewer burden and easy setup benefit. The contribution limitations are also beneficial for an employer.
If you have 100 employees in your business, then you can set an IRA for every employee.
- The employee can make salary deferral contribution of up to 100% of their compensation. Those who are 50 or above can make $3000 catch-up contribution.
- The employer can contribute to the account either matching employee contributions of dollar-for-dollar up to 3% of compensation, or 2% of each employee's compensation.
2. Solo 401(K) can be the best retirement plans for self employed
What is the best retirement plan if you are self employed? The simple answer is solo 401(K). Because it helps to maximize the contributions. However, this plan is ideal for sole proprietors, partnerships, C corporation and S corporation business owners. This plan gives you the chance of making the highest possible contribution as it recognizes you as both employer and employee.
How much can you contribute as a self-employed?
- As a self-employed, you can contribute up to 100% of compensation. The annual contribution can be up to $18,000.
- People who are 50 or above can contribute $24,000 and can make the employer contribution up to $54,000.
3. SEP IRA for a Sole Proprietor
The SEP IRA can be beneficial for the sole proprietor. Because it simplifies the administration tasks. It helps to grow the business. The businessman can easily maintain this plan; there is no annual charge that is an additional benefit.
- The employee can't make a contribution to this plan; only the employer can contribute.
- An employer can contribute up to 25% of compensation to a maximum of $54,000.
This plan is expensive, but the employer is not required to make a contribution every year.
Lastly, no matter how much money you earn from a job or a business, you should always try to save money. If you want to live comfortably after you are done with your work, then you need to select goals that you can reach. These goals should be based on the lifestyle that you hope to have. A major aspect of planning for your retirement is to choose which type of investment you are going to take up to reach your financial goals. You can choose your investment vehicle depending upon what you need to reach the target you have set.
To maintain a certain standard of living after retirement, you need to save enough money or have some sources of steady income. You should be honest about how you would want to live and make a rough estimate of how much you would need for that. You should start saving earlier to save the amount you estimated. You should also calculate the amount you would need to save to supplement the income you are getting from Social Security and any other sources. However, you can get help from an advisor to understand whether or not you are following right ways to save retirement money.