Saving for retirement is a long, but worthwhile journey and it’s ideal to start saving as soon as possible. The most recent survey released by the Federal Reserve on consumer finances indicates that the median retirement savings for those aged 35 and younger is only $18,000. When you start contributing to your retirement at a young age, your money will grow throughout the years, providing you with enough money to last through retirement.
Learn about two common types of retirement savings’ methods, some strategies to consider, and the importance of working with a financial advisor.
401k
One popular solution for saving for retirement is a 401k. This is a tax-advantaged plan that allows you to allocate a portion of your wages into your retirement account. Many employers offer a 401k as part of their benefits package. You’ll be able to choose how much you want to contribute per paycheck and those funds will grow tax-free over time. Be sure to check with your employer on requirements and when you’re eligible to participate.
Individual Retirement Accounts (IRA)
An IRA is another popular solution for retirement saving. IRAs are also tax-advantaged savings plans that can help you save money for retirement. Two popular types of IRAs are the Roth IRA and the Traditional IRA. With a Roth IRA, you contribute after-tax dollars, and your money will grow tax free. With a Traditional IRA, you can contribute pre- or after-tax dollars, but your money will grow tax deferred. For both, funds can be withdrawn beginning at age 59-1/2.
Retirement Saving Strategies
1. Contribute enough for a company match at your workplace
One strategy to implement is to match what your company contributes to your 401k. A full match means that your contributions will be matched 100%, while a partial match means that your employer will match what you contribute at 50%. Check with your employer to see what percentage they will match up to. Any contributions made after that set percentage won’t be matched.
2. Reconsider touching your retirement savings
It might be tempting to tap into your retirement savings during an emergency, but it’s a good idea to leave those funds where they are. You could delay your retirement by withdrawing funds, plus you could be responsible for paying taxes and penalties, depending on the amount withdrawn and the type of retirement account the funds were removed from.
Learn more about the six steps to consider before tapping your retirement savings plan.
3. Automate your savings
Another way to grow your retirement savings is to have a portion of your paycheck contributed into your 401k or IRA automatically. This will allow for consistent growth during your working years, plus you won’t have to worry about manually contributing funds toward the retirement account.
Working with a First Bank Wealth Management Advisor has many benefits as you save for retirement. They’ll help you set financial goals, develop a plan to meet those goals, assess your current financial situation, as well as monitor and adjust your plan to help you meet changing goals or priorities.
Ensuring you have enough money saved for retirement can be complicated. Let an experienced professional help you develop a tailored plan aimed at meeting all your financial and retirement goals.