Tips to start saving for your future.
Have you put off planning for retirement? You’re not alone. According to the Employee Benefit Research Institute, only 46 percent of those surveyed in 2013 have calculated how much they will need, let alone set money aside.1 But according the U.S. Department of Labor, the best way to prepare for retirement is to know your retirement needs, and set up a plan. Here’s how.
Save early, save often. The sooner you begin saving for retirement, the more time your money has to grow. In fact, thanks to the power of compound interest, starting at age 25 versus 30 allows you to accumulate thousands more, even if you’re putting away only $50 a month.
Get real. Saving is more effective when you have a goal in mind, and a realistic goal is the best way to prepare for retirement. Bear in mind that the average U.S. life expectancy is 78, which means your retirement could last 20 years or more.2 In addition to a long retirement, you should consider the cost of inflation, which will take a bite out of your money’s buying power. Plan accordingly.
A 401(k) is easy, and one of the best ways to save for retirement. If your workplace offers a 401(k) plan, contributing to it will give you an immediate tax deduction, tax-deferred growth on your savings, and—sometimes—a matching contribution from your company. Set aside as much as you can, and start doing so as early as you can.
IRAs (Individual Retirement Accounts) are A-OK. There are two types: traditional IRAs and Roth IRAs. A traditional IRA offers tax-deferred growth, meaning you pay taxes on your investment gains only when you take distributions (bear in mind that if you take a distribution before you reach 59½, you may end up paying a 10 percent penalty). If you aren’t covered by a retirement plan at work, your contribution may be tax deductible (though contributions do have limits). Contributions to a Roth IRA aren’t deductible, but you won’t owe tax when you take distributions. Get more information here, so you can maximize your long-term savings.
Are you on track for retirement? Check out Nationwide’s Interactive Retirement Planner® to learn how much money you may need in retirement, how much you should consider saving monthly right now, and whether you’re on track to reach your goals. You can even find out how your financial decisions will affect your path, so you can take steps in the right direction.