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7 Tips to Save for Retirement

By David McAlpine, Peoples Bank Wealth Management Group Officer
 

Whether you’re just starting out, mid-career, or see your golden years approaching on the horizon, saving for retirement is key to your future. In today’s world, the average man lives to 82 years of age, while women live to 85 ½, making it especially important to save now for those years in which you don’t have an income.

Photo: Jar of money with Retirement on it.
Text: Whether you're just starting out, mid-career, or see your golden years approaching, saving for retirement is key to your future.

A retirement calculator can give you an idea of how much money you may need to retire when you decide to clock out of work for the last time. Still, it won’t show you the steps you can take to make your retirement dreams a reality. Don’t worry, we’ve got you covered — even if your current retirement savings plan is more “to-do” than “done.”

 

Here are seven retirement savings tips that will help you prepare for your best financial future:

1. Create a budget that includes retirement planning.

A budget is a tool that helps you balance income and expenses to meet your financial goals over a specific amount of time. Budgeting puts you in control of how and where you spend your money each month, whether that includes morning lattes three times a week, college tuition payments, saving for retirement — or some of each.

There’s no right or wrong way to budget, as long as you’re honest about including all of your expenses and income and that every dollar is accounted for at month’s end. Additionally, there are many different ways to budget, with formulas devoted to debt reduction, retirement planning, and more. Find the one that works for you — and stick with it.
 
Remember, once you retire, the biggest source of regular income you have today — the paycheck you receive from your current employer — won’t be there anymore. And, you’ll want to carefully calculate how much money you’ll need to live comfortably during your golden years. Should you need assistance, contact an experienced Peoples Bank Wealth Management Group professional who can help you take the first steps toward budgeting for retirement.
 

Photo: Budget on a computer
Text: Budgeting puts you in control of how and where you spend your money each month, whether that includes morning lattes three times a week, college tuition payments, saving for retirement - or some of each.

 

2. Open a retirement account.

Let’s start with the basics. It’s never too early — or late — to start saving for retirement. Unfortunately, research shows that nearly ⅔ of Americans in their 40s have less than $100K in a retirement plan, and more than a quarter of those in their 60s have less than $50K earmarked for retirement. This means that today’s the day — if you haven’t done so already, open a personal or business retirement plan that puts your money to work for you, allows you to maximize your savings, and lets you watch your nest egg grow. 

 

3. Take advantage of your company match.

If the company you work for offers an employer-sponsored retirement plan, check to see if they match employee contributions. Employer matching of your 401(k) or 403(b) means your employer will contribute a certain amount to your individual retirement savings plan based on the amount of your own annual contribution. If this is the case, do everything you can to meet the match.

 

4. Put money into an individual retirement account.

Supposed you’ve maxed out your 401(k) contributions ($19,500 in 2021). In that case, you can open an IRA that’ll allow you to contribute up to $6,000 more per year toward retirement. When you open a personal IRA account, you have two options: a traditional IRA or a Roth IRA. Both allow you to save for the future — the biggest difference is around how (and when) you’ll get a tax break:

  • Contributions to traditional IRAs may be tax-deductible. The earnings grow tax-deferred, but your money will be taxed when withdrawn during retirement.
  • Contributions to Roth IRAs are not tax-deductible. The earnings grow tax-deferred like a traditional IRA, but retirement withdrawals can be made tax-free (assuming the account owner is 59 ½ and had the Roth IRA open for a minimum of 5 years).
  • Contributions to a Roth IRA and deductible contributions to a Traditional IRA are subject to income phase out limits.
There are a few other differences as well. For example, although you get a tax break on contributions made to a traditional IRA, they also require that you begin taking required minimum distributions (RMDs) when you turn 72 (or 70.5 if you were born before July 1, 1949). On the other hand, you can keep as much of your money growing tax-free as long as you’d like with a Roth IRA. Your investment professional will be able to help you choose the type of IRA that best fits your lifestyle both today and in the future.

 

5. Make catch-up contributions.

Thanks to the Economic Growth and Tax Relief Reconciliation Act of 2001, workers ages 50 and older can make catch-up contributions to set aside additional earnings for retirement. These elective deferrals are larger than the standard contribution limit. If you turn 50 by the end of 2021, you’re eligible to make catch-up contributions of up to $6,500 in 2021 to a number of retirement plans including:
 
 
But that’s not all — those 50 or older can also make an additional $1,000 catch-up contribution to boost savings to Traditional and/or Roth IRA accounts.

Photo: Piggy bank on a laptop
Text: Workers ages 50 and older can make catch-up contributions to set aside additional earnings for retirement.

 

6. Use self-employment income to increase retirement funding.

If you have a second job, contract work, or any other side hustle that generates self-employment income, you can put it to work for you in a 401(k) or a Simplified Employee Pension (SEP) plan.
 
  • A SEP allows you to contribute up to 25% of your net self-employment income, up to $58,000 (2021).
  • If you’re under age 50, you can invest up to $19,500 (2021) in a 401(k) in the role of employee (and even more as an employer.)

7. Use your Health Savings Account (HSA).

Let’s switch gears for a minute. If you’re maxing out your 401(k) and IRA contributions but still want to fortify your retirement plan, an HSA might be the answer? With an HSA, you can contribute pre-tax dollars, pay no taxes on earnings, and withdraw the money tax-free now or in retirement to pay for qualified medical expenses — during the years you’ll probably incur the most expenses and need the most care.
 
Prior to age 65, distributions for non-qualified medical expenses may be subject to income tax plus an additional 20% penalty.  After the age of 65, distributions for non-qualified medical expenses are no longer subject to the 20% penalty; however, they may still be subject to income tax.
 
The 2021 IRS contribution limits for HSAs are $3,600 for individual coverage and $7,200 for family coverage; however, you must be covered by a high deductible health plan in order to contribute to an HSA.

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Text: At Peoples Bank Wealth Management Group, we can help you determine if you're on track to meet your retirement goals. Our team is committed to helping you plan for the future.
Your Future is Now

At Peoples Bank Wealth Management Group, we can help you determine if you are on track to meet your retirement goals and objectives. Our team is committed to helping you plan for the future you want while treating you and your retirement portfolio with honesty, integrity, and respect. For more information about retirement planning, saving for retirement, or investing for the future, fill out the Quick Contact Form or give us a call at (712) 722-0100 today. 


 

Peoples Bank Wealth Management Group does not provide legal or tax advice.  Please consult with your legal or tax advisor in regards to your individual situation.  Investments involve risk including the possible loss of principal.  Investment products are not FDIC insured, not a bank deposit, not guaranteed by the bank or any U.S. Government Agency and principal may lose value. 

 

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