More and more Americans do not have access to a retirement savings plan at their workplace. Research has shown that people are 15 times more likely to save for retirement if they’re able to do so out of their regular paycheck as employees. But don’t be dismayed if your employer doesn’t provide a 401(k) plan. There are still plenty of ways to save for retirement.
1. Speak with a financial advisor about funding an IRA or a Roth IRA. An IRA, or an Individual Retirement Account, is a type of savings account geared toward retirement that offers a few tax advantages. With traditional IRAs, you can defer paying income tax on up to $5,500 that you contribute. Investors over age 50 can defer paying income tax on as much as $6,500. You can defer to pay income tax while you invest your money in your IRA, but income tax will be due once you withdraw the money from the account. A Roth IRA is slightly different, in that you do not get a tax deduction on your contributions, but you don’t pay any tax on the earnings and the withdrawals are tax-free when you’re ready to retire.
2. Save your tax refunds each year. Put them aside in an account promised for retirement. Using IRS Form 8888, you can directly deposit your tax refund into a savings account, an investment account or an IRA.
3. Set up a direct deposit. You can allocate a certain percentage of each of your paychecks to go into your retirement account. That way, you can save passively and ensure your money is set aside in a safe place. How much should you set aside? Most financial experts are now recommending saving 15% of your income for retirement.
4. Set a goal. For whatever reason, goals help us accomplish things easier. Figure out how much you need to save, set that goal and reach for it. If you’re curious about how much you’ll need for your retirement years, consider using a retirement calculator.
5. If you’re able to, consider delaying your Social Security benefit. The older you are when you file for Social Security benefits, the greater your annual payment (up to age 70).
Once you have your nest egg, the next important step is to protect it. Over half of America’s seniors will face the need for long-term care during their retirement. Long-term care facilities can be a crippling drain on a family’s finances. In fact, the national average cost for a private room in a nursing home is over $80,000 per year. Don’t lose your life savings to a nursing home. Protect yourself by investing in Long-Term Care Planning. For more information about how to protect your assets from the costs of long-term care, visit our Medicaid Planning page or contact us for a free consultation.