You’ve worked hard your entire working career to save enough money for retirement, but will it be enough? Did a simple mistake along the way crush your savings? Almost everyone has heard, at least once in their life, the phrase “a penny saved is a penny earned” but not too many people have actually lived their life that way. If your retirement date is rapidly approaching or if you’re already retired, there are a few things that you can do to help ensure you reach your financial goals. Here are 3 helpful tips that can enhance your retirement.
Our first tip for you is to take advantage of “catch-up” contributions. At age 50, workers can make annual “catch-up” contributions in addition to their normal contributions. In 2021, you can contribute up to $6,000 to an IRA if you are under 50 and an additional $1,000 if you are 50 or older. Those 50 and older can also contribute an additional $6,500 to a 401(k), 403(b), most 457 plans, and a government Thrift Savings Plan in 2021 for a total of $26,000.[1]
The second tip? Create a plan for paying your taxes. While the above scenario might sound good in theory, if you’re not careful you can lose a large chunk of your savings to the IRS. With a traditional 401(k) plan, your savings will be subject to taxation once you begin taking your withdrawals. This is because the contributions are made tax-free, and with that benefit, you pay the taxes on it when you’re older. Try preparing ahead of time for these particular taxes and account for them when outlining your retirement budget.
Third, you want to try and get rid of your debt. One of the most difficult things to adjust to in retirement is living on a fixed income. You will no longer be receiving a large, steady paycheck from work, so getting as close to debt-free as possible will undoubtedly enhance your life in retirement. Credit card debt can be detrimental to your retirement strategy, which makes it important for you to focus on ways to chip away at the outstanding balance.
In the end, whether you’re in retirement or working toward it, we can help you understand what needs to be on the top of your financial to-do list. It’s never too late to make a positive change and get on the path to financial independence. Request a complimentary, no-obligation financial review and we’ll work with you to find an approach to help you achieve your long and short-term goals for retirement.
