RAMPING UP FOR RETIREMENT
While there are seemingly a million reasons why you might not want to take money away from your paycheck to save for retirement, there are a dozen or so great reasons why you should. Saving a tiny bit each month can go a long way to increase your comfort as you reach those golden years. It’s easier than you might think, and it’s never too late to jumpstart your retirement savings.
INVEST IN A 401(K)
A 401(k) can be the most important part of saving for retirement. When your company provides you with a tax-deferred plan run, don’t walk, to take advantage of it. Because the money is pulled out of your take-home pay before taxes, investing actually lowers your taxable income so you pay less income tax. If you make $45,000 a year and your a tax bracket is 25 percent, contributing the minimum six percent from your salary into a tax-deferred 401(k) reduces your taxable income to $42,300.
SET UP AUTOMATIC INCREASES
SET UP YOUR OWN 401(K)
CONSIDER CATCH-UP CONTRIBUTIONS
Don’t forget that you can contribute “catch-up” contributions. The Internal Revenue Service (IRS) limit for elective contributions (Pre-tax and Roth) is $18,500. If you are eligible to make catch-up contributions, that limit is extended by $6,000. These limits may increase each year to account for inflation. The IRS also limits total contributions (pre-tax and after-tax, from both employee and employer). For more information, refer to irs.gov.
SET UP AN AUTOMATIC SAVINGS ACCOUNT
OPEN A HIGH YIELD MONEY MARKET ACCOUNT
Sallie Mae and CIT Bank are currently offering easy to open money market accounts. Sallie Mae is offering a 2.12 percent annual percentage yield (APY) with no minimum deposit. CIT Bank is offering 1.85 percent with $100 down. Look for FDIC insured, low- or no-fee requirements when opening a money market account. Look for the option to write checks or make withdrawals on the account (up to 6 times a month without penalty) to move funds into a 401(k) or IRA to offset taxes and save more money. Credit cards also offer money market accounts. Discover is currently offering a $0 minimum to open, 1.90 percent APY money market account.
SPLIT YOUR PAYCHECK
DETERMINE WHAT YOU NEED TO SAVE
Retirement calculators like one from NerdWallet can give a glimpse of what you should be saving each month to make your retirement a comfortable one. The initial result may scare you, but don’t let it. If you have to save $250,000 for retirement and have 15 years to go, that’s $1,300 a month. It may seem like a lot of money, but invest in a 401(k) and some aggressive, high-yield mutual funds and you will get there in no time.
CONSOLIDATE ACCOUNTS & REDUCE FEES
If you have several accounts and you’re paying $10 to $20 per month in maintenance fees, you’re wasting money. Consolidating accounts could save you hundreds of dollars in annual bank fees — money that could be going towards your retirement.
SET UP CASH BACK REWARDS
ROUND UP YOUR PURCHASES
Rounding up is a great way to save money without feeling like you are breaking your bank account to do so. Apps like Qapital make saving easy and understandable. Pick your goal, and the app sets up a savings rule and a round-up rule. Rules could be anything from, “Spend less than x amount on Starbucks per week, and save the rest for a vacation” to “Round up amounts and deposit the rest into a savings account.” The app will also invest money into a diversified portfolio based on your income and risk assessment.