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Funding Your Retirement

Are you funding your retirement accounts the right way?

Financial Freedom wooden sign with a beach on background

Did you know that half of all Americans have no savings set up for their retirement? Failing to fund a retirement account is a quick way to ensure you don't have the money you'll need upon retirement to live a lifestyle that is fulfilling and fun. Don't fret if you haven't started saving yet; there are several ways to fund a retirement account that will ensure you have the life you want once you no longer head into the office every day.  

1. Don't Leave Free Money on the Table

If your employer offers a 401k match, don't walk away from the free money. Not only will your contribution be added to the account pre-tax, but each year you could garner free money from your employer if they offer to match your contributions. Every employer match is a little bit different, so read the fine print, but any money is better than none. If your employer offers a 100% match, you are in an excellent position to quickly fund your retirement, but even a 50% match can leave you with more than $1,000 a year in free funding.

2. Don't Leave it Completely Up to your Employer

While a 401K is a great investment vehicle, consider opening an individual retirement account. IRAs are tax deductible and will give you a chance to build up a second nest egg. To find out which type of IRA is best for you and your circumstances, sit down with a financial advisor to discuss your options. Generally speaking, you can choose a traditional IRA or a Roth IRA. Traditional IRAs are tax-deductible at the state and federal level, while Roth IRA contributions are generally not deductible, but withdraws and earnings are tax-free.  

3. Put Away Extra Funds

It is easy to fall into the trap of spending extra funds when you happen upon them. It is super tempting to spend your tax refund on a great vacation or to increase your lifestyle the second you get a pay raise, but experts advise against it. Instead, use your increased wealth to fund your future! Experts suggest using half of any pay raise to fund private retirement accounts further. It is also recommended you sock away tax refunds either in a rainy day fund or in your retirement accounts, as well.  

4. Take Advantage of Catchup Contributions

If you've failed to save the amount you'll need for retirement by 50, don't forget to take advantage of rules that allow you to contribute more once you reach 50. Individuals under 50 can contribute $6,000 a year to an IRA, but those over 50 can contribute $7,000 a year. Individuals under 50 can contribute no more than $19,000 to a 401k account; however, once you reach age 50, you can begin contributing $25,000 a year. Take the opportunity to pad your nest egg. Whether you've been planning for retirement for years, or you are just starting out, there are ways to ensure you are planning ahead the smart way. Don't be afraid to look at your options and speak to a financial advisor about what you'll need to enjoy your retirement. It is the best way to gauge where you are at and where you need to be!

Speak to an IB Wealth Management representative today!

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