FOUR TIPS FOR RETIREMENT SAVINGS
It's important to have a clear vision of the lifestyle you want in retirement. Are you planning to travel? Start a business? Get into charity work? Be sure you adjust your portfolio and your savings strategy as needed to help ensure you'll have enough income in retirement to support the lifestyle you've chosen.
Here are some tips to help:
1. Pay yourself first. Try to avoid the "save what's left" mentality. Set aside automatic contributions to your employer-sponsored plan, or arrange automatic transfers from your checking account to your IRA. Do both if you can, and maximize catch-up contribution to save even more. Obviously you need to find an amount that works with your budget, but paying yourself first will help ensure you have enough money set aside when you retire.
2. Contribute more as your salary increases. When you receive a salary increase or bonus, put as much of that into your retirement savings as possible — all of it if you can. If you've maxed out the contributions on your plan, think about making some other kind of long-term investment. It's tempting to spend that extra money as soon as it comes in, but the returns on a wise investment can make a raise or bonus even bigger.
3. Contribute as long as possible. The amount you set aside with each paycheck is only part of the equation. It's also important to save for as many years as possible. The longer your money is in your investment account, the more time it has to grow and compound. There is no age limit for contributing to a Roth IRA or employer-sponsored plan, as long as you've earned income for the year. However, you can only contribute to a traditional IRA until the year prior to the year in which you turn 70½.
4. Avoid early withdrawals. You can't withdraw funds from a non-IRA retirement plan before you reach age 59½, unless you leave your job or qualify for a hardship distribution. If you leave your employer prior to the year you turned 55 and withdraw funds before age 59½, you may have to pay a penalty in addition to income tax.
In some cases, employers include a loan option with their retirement plan offering. If you take a loan against your retirement plan savings, you must repay the loan at a fixed interest rate, and your payments go back into your retirement plan. If you lose your job or leave your employer before an outstanding loan is repaid, you may be required to repay the loan in full within 60 days.