Karen B. Arthur | Posted on Apr 25, 2019
You may have heard the cliche "time just flies by". For many people, it seems as if they will never make it to retirement. Yet, in the blink of an eye, this season of life always arrives. Will you be ready?
Regardless of which season of life you are currently enjoying, it's never too late to begin saving and growing your retirement nest egg. Furthermore, if you're just beginning your journey, you would be amazed at how much you could save for retirement by starting early and building wealth over time.
There are several different strategies to consider in preparation for your golden years:
- Start today. If you are just getting started in planning for retirement, focus on saving as much as you can now. Your assets have the ability to generate earnings reinvested to produce their own earnings and grow in your favor. If you are nearing retirement, consider increasing contributions to your savings plan or possibly delay taking Social Security benefits.
- Evaluate your spending habits. Review your budget every month and find ways to reduce spending and have more money to invest. Pay yourself first by setting up automatic retirement account contributions each month.
- Contribute to your employer-sponsored plan. If your employer offers a traditional 401(k) plan and you meet the eligibility requirements, you may be able to contribute pre-tax money to your retirement account. With a pre-tax deduction, the money comes out of your gross pay before taxes are withheld from your paycheck. Pre-tax deductions reduce your taxable income, which means you will likely owe less income tax. The contribution limit for a 401(k) in 2019 is $19,000.
- Meet or exceed your employer's company match. If your employer offers a company match to your 401(k) retirement account, contribute enough to take full advantage of the match. For example, if your employer offers a dollar for dollar match up to 4% of your salary and you earn $40,000 a year and contribute $1,600 to your retirement plan, your employer would contribute another $1,600. When your employer offers a match, it is essentially free money to help you with saving for retirement.
- Consider opening an IRA. There are two options to consider when establishing an Individual Retirement Account (IRA). In a Traditional IRA, which may be tax-deductible, the investment earnings have the chance to grow tax-deferred until you take withdrawals at age 59 1/2 or older. The second option is a Roth IRA, funded with after-tax contributions. Qualified distributions and earnings from a Roth IRA are not subject to federal taxes. However, certain holding period requirements must be satisfied in order to take the distributions. The contribution limit for a Traditional or Roth IRA in 2019 is $6,000.
- Take advantage of catch-up contributions. If you are 50 years of age or older, you are eligible to save beyond the normal limits that have been established with a catch-up contribution to your 401(k) or IRA. This allows you to increase savings in your retirement plan. The catch-up contribution limit in 2019 for a Traditional or Roth IRA and 401(k) savings plan are $1,000 and $6,000, respectively.
Saving for retirement may seem like something you can tackle later, or it may feel like you've already waited too long to begin. No matter which end of the spectrum you identify with, saving for retirement is an investment in yourself. Ready to get started?
Retirement planning can be an overwhelming process depending upon the complexities of your situation. Like other financial institutions, ACNB Bank often serves as an advisor to individuals in our community and maintains the specialized skills necessary to assist you as you pursue and develop your retirement goals.