Saving for retirement is a great idea for many reasons. Along with building a nest egg to help you enjoy life after your career, you can also get tax benefits and even free contributions from your employer. If you’re an adult and you haven’t started saving for retirement, it’s time to get started. Here are some retirement planning basics you’ll want to know about.
If your employer offers a 401(k) program, making contributions can get your retirement savings started. Plus, you get an immediate tax deduction. If your employer offers a matching program and you’re not participating, you’re missing out on free money. You should always make contributions to maximize matching.
Individual Retirement Accounts
These accounts, also known as IRAs, allow you to make contributions that grow in the investment vehicle of your choosing. Traditional IRAs grow tax-deferred and you pay taxes when you make withdrawals in retirement. Roth IRAs grow tax-free; your contributions are taxed at the time you make them and then you will owe no taxes when you make withdrawals.
Dividing your retirement investments into a variety of vehicles can help you grow steadily while minimizing risk. A general rule of thumb is that your portfolio should get more conservative the closer you get to retirement.
Retiring on time or even early is a wonderful goal to have. However, with life expectancy consistently climbing and with the growing costs of healthcare, many people aren’t prepared for 30 or 40 years of retirement. You may find that you can continue to work, perhaps part-time, to stretch retirement savings.
As you approach retirement, do you still need a five-bedroom home? Do you still need the eight-passenger SUV you used to cart the family around? Look around at your assets and decide which you need, and which you once needed. You may find that you have a significant chunk of change wrapped up in items that can be sold or downsized.
Where are you in the process of saving for retirement? If you’re not as far along as you’d like to be, you can talk to a financial advisor at Community Bank. We can help you start your savings and find strategies for making them grow. When you’re ready to talk, we’re here.