Six Tips for Saving Money in Retirement
There is no exact right way to save for retirement. People have different priorities, incomes, and circumstances that come up and change the game plan for retirement saving. Therefore, planning for retirement is more methodical and personalized when people work with financial advisors.
There are, of course, many different approaches you can take toward building a retirement nest egg. Here are six general tips everyone can benefit from when it comes to saving for retirement.
Take Advantage of Employer Benefits
If you’re employed and your employer offers matching programs – take advantage of them! For example, if your employer matches 401(k) contributions, take advantage of the free money that is at your fingertips.
For the best benefit for retirement savings, contribute the maximum amount you are legally able to your retirement savings plans. The earlier you start the better it is for your retirement account.
Consider Permanent Residency Location
Where you decide to live in retirement is a big contributing factor to how much your cost of living will be. Not only that, but where you live plays a role in how much certain insurance premiums will be and how much you pay in taxes.
Tennessee, South Dakota, Florida, Texas, Wyoming Nevada, and Washington pride themselves on zero income taxes. However, it’s notable that New Hampshire and Tennessee do tax dividends and interest. Luckily, the majority of states don’t tax Social Security.
Evaluate Potential Healthcare Costs
Deciding where to live in retirement plays a big role in how you live in retirement. This is because taxes on your health insurance depends greatly on where you live. Always look into how much your premiums will be for all aspects of your health. Get quotes early for insurance. That will help to budget for your future.
Enroll in a Health Savings Account
This is a savings vehicle that truly is one of the best for establishing a good financial foundation for healthcare costs in retirement. Many financial experts recommend this to just about everyone trying to prepare for healthcare costs in retirement.
The money contributed to an HSA is yours forever and compounds interest overtime. You can even use the money in the account to invest in stocks and bonds to accelerate your savings. The money you contribute to your health savings account lowers your tax burden for the year. In 2020, you can contribute up to $3,550 as an individual or up to $7,100 for families and people aged 55 or older can contribute an extra $1,000 contribution each year as a catch-up contribution.
Utilize Catch-up Contributions
Deciding to ramp up your retirement savings in your 50s has its perks. Once you hit the age of 50, you can take advantage of catch-up contributions. Adults who are 50 or older can put additional contributions into their IRA and 401(k).
If and when you become eligible, add an additional $6,000 every year to your 401(k) and an extra $1,000 per year toward your IRA. If you can contribute the extra money, doing so can add a tremendous amount to your retirement savings over 15 years.
Various financial experts recommend the snowball debt recovery program. You should start by tackling your smallest debt first until it’s paid off. You should then start throwing money toward your next smallest debt. More often than not, the satisfaction of paying off just some of your debts will give you motivation toward attacking the rest of your debt more aggressively.
The biggest debt the majority of people adopt is their mortgage. One of the best ways you can reduce your retirement expenses is by paying off your mortgage before you get there. According to the Consumer Financial Protection Bureau (CFPB) found that 30 percent of homeowners age 65 or older still carried mortgage debt.
When it comes to saving for retirement, talk to an expert to figure out what makes the most sense for you and your lifestyle. You don’t want to roll the dice and hope it all works out with you retirement funds – it takes planning!
Danielle K. Roberts is a Medicare insurance expert and co-founder at Boomer Benefits, where her team of experts help baby boomers with their Medicare decisions nationwide.