Whether you are 30 or 50, saving for retirement is a critical financial strategy. If you want to retire one day, you will need to have enough money saved up to last for the rest of your life. Whether you want to retire early or are playing catch up, there are a few tips that a financial advisor, such as Don Gayhardt, will share to help you stay on track financially.
Take Advantage of the 401(k) or 403(b) Company Match Policy
If your workplace offers a retirement plan, you need to take advantage of it. Most companies have something called a 401(k); however, if your company is a nonprofit, it might be called a 403(b). More importantly, most companies are going to have a matching policy. For example, if your company has a dollar for dollar match up to three percent of your paycheck, this means that you can put in up to three percent of your paycheck and your company will match every dollar.
When it comes to your retirement, this is basically free money. Even though you might not like seeing a smaller paycheck, remember that you are saving for retirement. Do not miss out on the opportunity to have your employer contribute to your retirement. Make sure that you match up to the maximum allowed amount.
Think About Tax Deductions from an IRA
The government already takes enough of your paycheck, so make sure that you don’t give Uncle Sam any more than you must. In addition to the retirement plans mentioned above, open an IRA. A regular IRA allows you to deduct your contributions from your gross taxable income. Therefore, in addition to saving money on your taxes, you can contribute to your retirement.
You may want to open a Roth IRA instead. Unlike a regular IRA, you claim Roth IRA deductions when you take money out of the plan after you retire. Work with a financial advisor to figure out which plan is better for you.
Retire in the Right State
Finally, even though you won’t be working when you retire, you will still have to pay income taxes. If you want to minimize the amount of money you will pay in income tax, retire in the right state. State income tax rates vary widely from place to place. For example, California has a 10 percent state income tax. In contrast, Florida, South Dakota, Tennessee, Texas, Nevada, Washington, and Wyoming do not have any state taxes at all. On the other hand, Tennessee does tax dividends from the stock market. Some states will even tax your social security benefits. Where you live is going to impact how much money you owe in taxes. If you are planning on moving after you retire, keep this in mind.
Plan Carefully for Retirement
These are a few of the most important tips you should keep in mind when it comes to retirement planning. With the help of an experienced financial advisor, you might even be able to retire early.