You can begin saving for retirement at 50, even if your retirement fund is far out of reach. Whether you’re just getting started with saving for retirement or your retirement funds are far behind and you need a little help, there are simple steps you can take to get you on track.
The key is knowing where to begin. In other words, you have to ask yourself, “Where do I begin?” Whether you’re just getting started with saving for retirement or your retirement fund is far too far behind and you haven’t made any significant progress, there are steps that you can take right now to get you on track.
- 1 Budgeting for retirement helps you set and reach your retirement goals
Budgeting for retirement helps you set and reach your retirement goals
Your first step in setting and reaching your retirement goals are calculating your average income after taxes and retirement savings. This allows you to figure out how much you need to set aside for your nest egg. The purpose of saving for retirement is to set aside money for your later years so that you can live on them. So, the more money you save now, the better off you’ll be when retirement comes. If you don’t have the right amount saved, then you won’t be able to survive until you are older.
Have a discussion with your spouse about saving for retirement
Most people are too focused on the day-to-day life and don’t make the full commitment needed to save for their golden years. When you both make a commitment to saving for retirement, you are putting aside the time and money you would normally spend paying off debts and building nest eggs. Having this discussion will also give you an opportunity to work out details regarding your retirement account such as what kind of participation is encouraged, whether it’s a hsa, IRA, rollover, etc.
Save for your IRA instead of a traditional IRA
Traditional IRAs have limitations placed upon them by the Internal Revenue Service. On the other hand, an IRA is designed for your future. Unlike a 401k or other type of plan, an IRA has no restrictions when it comes to contributions and earnings. As a result, more money can be saved for your retirement if you enroll in an IRA instead of saving for it in a traditional account.
Take advantage of tax-deferred growth
In addition to increasing your potential for future savings, tax deferral can actually help you achieve your retirement savings goals faster. If you are a stay-at-home parent, take advantage of IRA’s tax-deferred contributions for the benefit of your children. If you are a retiree, take advantage of tax-deferred growth in your non-taxable traditional account. In both cases, this can add up to a significant amount of savings over time.
Know how much to save for your retirement
The easiest way to do this is to begin planning now. Look at your current expenses and figure out what amount of money you have coming in every month that you are allowed to take home as deductions before tax day. Once you know your annual income, calculate your standard deduction and take it every year. Now, look at your expenses and see what amount of money you can deduct before tax day.
Maximize your retirement savings with contribution limits
The most important thing is to keep contributing to your IRA. After all, it is a tax-deferred investment and the more you contribute, the more money you will save for your retirement. There are several different IRA contribution limits, but keep in mind that a high IRA contribution limit does not necessarily translate into greater savings. You will need to take into account any investment fees associated with your IRA contributions before you reach retirement age.
All in all, keeping track of your individual retirement account is the key to maximizing your individual retirement savings. Knowing where your money is going is half the battle. It is best to stay updated with your IRA and supplement your retirement planning with investments in the real estate market or other safe places. Keep track of what you are spending for lunch and dinner and calculate how much you would spend if you were living on bread and butter each day. If you are properly saving for retirement, you will never have to worry about going hungry.