While getting a later start in life on planning for your retirement isn’t ideal, you shouldn’t think you are now facing a hopeless situation. In fact, many people get a late start on their retirement planning and still do quite well, and so can you. If you are realistic about your financial situation and are determined to be proactive in the planning process, you may do much better than you anticipated. To find out how, here are some tips to help in your retirement planning.
Open a Roth IRA
Even if you are getting your retirement planning started later than others, opening a Roth IRA can be a great first step in helping you save the money you’ll need for retirement. Easily done at your local bank, the biggest advantage of a Roth IRA is that it gives you a big tax break once you start making withdrawals, which can be very important after you’ve retired. Remember that if you want to withdraw the earnings in a Roth IRA without taxes, you’ll need to wait five years after opening the account. Otherwise, you will have to pay taxes on the IRA earnings. If you feel you can contribute a decent amount and won’t need to touch the money for a few years, a Roth IRA could be the right choice for you.
Since there are plenty of experts out there who know all about retirement planning, take advantage of their knowledge to educate yourself. For example, you can take tax planning classes at local colleges and universities that are specifically geared for pending retirees. These classes, which will teach you various tax strategies, can be helpful in allowing you to maximize your retirement income. Classes, online education, or talking to an expert are all perfect ways to get started on your retirement planning journey, especially if you aren’t sure where to get started and what different options you might qualify for.
Make Maximum Contributions
If you can do so, try to make the maximum contributions to your retirement accounts. For example, if you open a Roth IRA, the maximum amount you can contribute as of 2020 is $6,000 per year. However, if you are past age 50, you can also contribute an additional $1,000 per year in what is termed a “catch-up” contribution, making the total amount $7,000 per year. By taking advantage of this, your retirement nest egg could grow very quickly. If you have more money that you’d like to contribute to an account, talk to a professional to see what other options you have. There may be other possibilities for personal investments and saving programs.
Minimize Your Expenses
While you are busy opening a Roth IRA and learning all you can in tax classes, also take a close look at your expenses to see what if anything can be cut. In doing so, you may discover you can save much more money than you imagined. For example, you should try to decrease or eliminate as much credit card debt as possible, and also consider cutting back on dining out, which can be far more expensive than fixing meals at home. Consolidating or snowballing your debt payments is a quick way to pay bigger bills now in order to have more money freed up for personal use or investments in the future.
Once you implement these tips into your plan of action, retirement planning will be much easier and result in a much bigger nest egg for your golden years. Consider talking to an accountant or retirement planner to get a few more tips or information to get you started on your journey.