The rule of thumb when planning for retirement is that you should start at the earliest. As a matter of fact, the earlier you start investing and saving, the better off you will be, thanks to the power of compound interest.
Even if you haven’t started saving, or started off too late—you are not alone. There are numerous steps that you can use to make your retirement savings bolt upright.
So, no matter what your current situation is, consider the following steps to help boost your retirement plan contributions.
Like with most other things, the earlier you start, the better off you will be. Even if you are just beginning to take the route—contribute, save and invest as much as you can now and let compound interest do the job. When your assets generate rewards, these rewards are reinvested to bring their own earnings, creating a winning situation for you.
Contribute in a traditional 401(K) Plan
Your employer will typically offer the 401(K) Plan where you can contribute your pre tax salary. To understand this, let’s look into an example:
Your tax bracket is 15 percent and $100 per salary is your contribution amount. This money is taken out off your paycheck before taxes; therefore, the money that you take home will drop only by $85. This clearly means that you can save up more money without feeling a heavy burden on your monthly incomes.
As of 2016, workers can contribute up to $18000 in the 401(K) plan.
Accommodate with your employers match
Many employers will offer to affirm with the 401(k) plan and if you want to leverage the benefits, make sure you contribute as much as you can.
For example, your employer may offer to accommodate 50 percent of your contribution to up to 5 percent of your monthly income. In other words, if you earn $50,000 annually and contribute $2,500 towards your retirement plan, your employer will contribute in another $1,250—who doesn’t like some free money?
Often times, employees are not able to make enough savings to take full advantage from the 401(K) plan. If that’s the case, then you should plan your savings so could make claims for similar funds from your employers.
To help constitute your nest egg, consider authorizing an IRA (Individual Retirement Account). There are two options to go about it: Traditional IRA is a great way to supplement your retirement savings. Contribution to these may come in the form of after tax deductions, while earnings are tax free until withdrawals are made.
Roth IRA, on the other hand are subsidized with after tax contributions. Therefore when you turn 59.5 in age, all your withdrawals and earnings will be federal/state tax free (only if you have held the account for 5 years to the minimum).
To double your retirement contributions, you should recognize the need of saving money today. Understand how much you need or you will need in order to safeguard income after retirement. Also, you can couple up the aforementioned ways to guide you in the process.