Financial Planning For Retirees – Maximizing Your Savings

Although at an early middle age stage you might struggle to pay mortgages, buy life insurance and use credit cards, it can also be a great opportunity to set higher savings targets and become a more aggressive saver.

Savings accounts (401[k] or IRA or otherwise): put as much money as possible into them. Replace 70 to 80 per cent of your preretirement income.

Maximize Your 401(k)

We all know we need to save for retirement, and more saving equals more to live on via the power of compound interest. But now, we are adding the idea of making a maximum increase to every single one of those extra dollars. 401(k) plans are just one of several ways to both save and have those savings grow. SmartAsset’s 401(k) Calculator will help you determine how much of your income to save for retirement, taking into account employer match, returns on your investment and other factors. You may also want to respond to each of your raises by saving a higher percentage. Setting aside any windfalls–such as tax rebates, annual salary bonuses, insurance settlements or inheritances–for savings or investing for retirement is another easy strategy. It’ll help make your annual retirement-savings target much more easily attainable, especially if the balance in your primary traditional IRA or 401(k) account maxes out. Open a new traditional or Roth IRA to get more investing space.

Maximize Your IRA

With an IRA, you have access to the full universe of investments, not just those offered by your employer’s plan, which might mean more choice for building a more diverse portfolio that can help blunt inflation’s effects on your retirement income. If you are in the fortunate position to receive further money from tax rebate on income or bonus at work, try investing it in your pension rather than splashing out on luxury purses or foreign destinations. By doing this, you will be closer towards reaching your retirement target. To be financially sound, one should stop at nothing to save early and often. If you’re working, funnel as much money as you can into your workplace retirement plan and, if your employer offers matching funds, contribute as much as you can up to the maximum. Pay down any high-interest debt early – the returns on investment are often far surpassed by the interest rates on those pesky credit cards. Leave alone all that money you’ve ear-marked for retirement; too many are tempted to pull out a few dollars for an emergency and wreck their earnings with hefty withdrawal penalties and taxes.

Maximize Your Health Savings Account

If any of those apply, an HSA could be right for you. With an HSA, you can pay less in taxes today and, regardless of your age, grow your retirement savings – all with tax-free growth and income – to help cover future eligible medical expenses. Social Security will pay about 40 per cent of pre-retirement income; empowering a pension strategy, supplementing Social Security pensions with investments or retirement savings vehicles should be an integral part of any retirement strategy. Investment accounts that allocate assets to stock and bond fund combinations have the potential to earn long-term capital gains that are hard to replicate, but they also require ongoing annual management from yourself. An income annuity could help you to lock in lifetime income So, it is clear that your options must be consistent with your cash flow and risk tolerance, as well as with your investing goals.

Maximize Your Life Insurance

Saving for a car or house deposit is simple, because these amounts are easy to estimate. Saving for retirement is difficult, because it’s hard to forecast future costs. Estimate your expenses when you retire, from housing to food, entertainment, hobbies and travel. Any debts you already have are another consideration. Sucking all your cash into your savings won’t be productive if you’re obliged to service debts with high interest rates, like many credit-card balances. So, you’ll want to make minimum payments on that high-cost debt while simultaneously chipping away at the principal. And if you do not already do so, contribute your maximum allowed tax-advantaged amounts to employer-sponsored plans like 401(k) plans and 403(b) plans, as well as to individual retirement accounts, including traditional IRAs and Roth IRAs.

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