Retirement might not be something you think about regularly, regardless of what stage you’re in your job. You may have some savings put aside, but they aren’t reserved for anything in particular. So, how should you save for retirement? Is it enough to put some money aside? Let’s look at how to save for retirement and our top tips.
Can’t touch this!
Do not withdraw your retirement savings! If you take the money out, you’ll lose interest and principal. In addition, you may lose tax benefits or have to pay withdrawal penalties.
If you move to a different job, be sure to either keep your savings invested in your current retirement plan or move them to your new employer’s plan or an IRA.
Find out more about your workplace pension plan
If your work has one, look into the pension plan. Ensure that this plan covers you and you fully understand how it works. If you can get an individual benefit statement, this will let you check your benefit.
If you change jobs, check what will happen to your pension benefit, and keep track of which benefits you have from previous employers. If you have a spouse, also check which benefits you may get from their plan.
Use your employer’s retirement plan
Have you heard of retirement saving plans? These are a good option for you and your employer, but many businesses haven’t yet heard about them. If your employer hasn’t yet heard about retirement plans, ask them to set up one. They are a great boon for you both.
If your work already offers a retirement savings plan, sign up and add as much as you can to it. You’ll have lower taxes, your business may chip in more, and it’s easy, with the amount automatically deducted.
If you decide to go for it, find out everything you need to know. For example, how much do you need to contribute to avail of the full employer contribution? And how long do you need to stay in the retirement plan to get that money? Ask your employer everything before you commit.
Check out your Social Security benefits
Did you know that Social Security benefits can make up around 40% of your pre-retirement income? Estimate your potential benefit on the Services Australia website.
Use an Individual Retirement Account
Did you know that you can put up to $6,000 a year into an Individual Retirement Account (IRA)? If you are older than 50, you can put in even more. Of course, you don’t need as much money, to begin with, either. As well as this, IRAs give tax advantages.
When you open an IRA, you have two options – a Roth IRA or a traditional one. Depending on which option you go for, your money will get different tax treatment. In addition, your after-tax value will vary based on your chosen IRA and current inflation.
Remember basic investment principles
Your retirement savings are essential, but they are still subject to the same rules as any other investment. Always remember inflation – how much will your investments return several decades from now? As well as this, the type of investments you make is another significant factor in how much money you’ll end up with in retirement.
Get to know how your pension or savings plan is being invested. First, look into your plan’s investment options and ask your financial advisor questions. Then, diversify your portfolio by putting your savings in many different pots. Doing this should reduce your risk and boost returns.
You may change the amount you invest over time as your financial goals, age, and circumstances change. But financial security and knowledge will always go hand in hand.
Get more advice
Hopefully, our top tips have steered you in the right direction. But you’ll probably need more information tailored to your own individual goals, circumstances, and needs, right? So, if you want more information on how you can better save for your retirement, get in touch with a financial advisor. You could also make an appointment with your bank or talk to your employer and union about their available options. Ask plenty of questions and make sure you fully understand what you are doing.
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