When it comes to retirement planning, most people want to know how much they should save. We can always sit down and calculate a target goal together, but the truth is that we should always try to save as much as we can. It's hard to argue that someone has reached retirement with too much money in the bank!
To save even more in 2016, remember these six tips.
Put your raise to good use. Did you receive a raise at the beginning of this year? Ask your payroll department to divert half of the raise to your retirement savings account. You will still enjoy a pay bump, but you won't be tempted to spend every penny of it.
Make the maximum contribution. In 2016, the maximum allowable contribution to retirement accounts is $18,000. Saving money via a qualified account can help you earn valuable tax savings, because you won't pay taxes on that part of your income until you take distributions from the account in retirement. Depending upon your tax bracket, saving money this way can actually lower your tax bill – saving you even more money.
Shoot for your maximum employer match. Even if you can't make the full $18,000 contribution this year, try to at least meet your company's match amount. Otherwise you're missing out on free money.
Make additional catch-up contributions. Once you reach age 50, you can begin stashing an additional $6,000 per year in your retirement fund. If you plan to retire at age 65, taking this step will net you an additional $90,000 in your retirement account, plus the interest that will likely accumulate!
Claim the Saver's Credit when you file your taxes. Some people are eligible to claim the Saver's Credit, depending upon income. This important tax provision grants you 10 to 50 percent of last year's retirement savings contribution as a credit on your tax bill. If you receive a tax refund, consider stashing that money in your retirement account too!
Open an Individual Retirement Account (IRA). If you have reached the maximum allowable contributions to a 401(k) each year, that doesn't mean you can't save for retirement via another avenue. An IRA offers its own special tax benefits, and you can contribute $5,500 per year to it. If you're age 50 or more, you can make additional catch-up contributions of $1,000.
Call us for more information on saving for retirement. We specialize in helping people like you find the strategies that work for their budgets.
Carstens Financial Group focuses on providing comprehensive asset management, estate planning and life insurance solutions. Allow us to help you secure your financial future.