Six Ways to Save in Retirement
With so much talk about when and how to save for retirement, the process can be overwhelming, especially if you are behind and retirement savings.
That being said, here are some of the best ways you can assure you are doing everything you can to set up a retirement nest egg for yourself.
Estimate Potential Healthcare Costs
Every person looking into saving for retirement and ways to jumpstart their retirement nest egg needs to investigate how much insurance premiums are. This usually depends on where you decide to permanently reside in retirement. Insurance premiums are different and higher depending on where you live. Always investigate how much your premiums will be for all aspects of your health.
Use Catch-up Contributions
The great thing about turning 50 years old is that you can start taking advantage of catch-up contributions. For example, Americans who are 50 or older can contribute extra money into their 401(k) and IRA.
Once you turn 50, you can contribute an additional $1,000 per year toward your IRA and $6,000 each year to your 401(k). Taking advantage of these extra contributions can really boost your retirement savings over the next 15 years.
Get a Health Savings Account
Building a good financial foundation for your retirement nest egg depends on how you prepare for healthcare costs. Healthcare costs continue to rise, and many experts expect this trend to continue.
Health savings accounts (HSAs) are great tools for building up savings for healthcare costs in retirement. In 2020, you can contribute up to $3,550 as an individual or up to $7,100 for families and people aged 55 or older can contribute an extra $1,000 contribution each year as a catch-up contribution.
Evaluate Permanent Residency Location
Many Americans looking to retire often choose to downsize or relocate during their golden years. Where you decide to call “home” during your years in retirement plays a big role in your overall cost of living. Your taxes and cost of healthcare will directly correlate to where you decide to live.
South Dakota, Washington, Nevada, Texas, Florida, Tennessee and Wyoming have their advantages when it comes to taxes; those states have zero income taxes. Some of those states such as Tennessee do tax dividends and interest, however. Fortunately, the majority of states don’t tax Social Security.
Capitalize on Employer Benefits
Take full advantage of employer benefits if you can. If your employer has a 401(k)-matching program, participate in it.
If you can swing it financially, contribute the maximum amount you legally can toward your retirement savings to save more efficiently. Starting earlier is better than later.
Attack Outstanding Debts
People with debts should really focus on reducing that debt as much as they can before retiring and living on a fixed income. Saving for retirement is a lot more difficult if you go into it with debts. Many financial experts suggest the snowball debt recovery method.
Begin by making contributions toward your smallest debt first, then keep making contributions until that debt is paid off. Keep up the momentum by contributing money toward your next smallest debt.
Mortgages happen to be the biggest debts people take on that affect their retirement, according to several financial experts. In order to reduce retirement expenses efficiently, pay off your mortgage as early as possible. According to the Consumer Financial Protection Bureau (CFPB), about 30 percent of homeowners 65 or older still carry mortgage debt. Doing what you can to eliminate this debt will benefit you in the long run.
Danielle K. Roberts is a Medicare insurance expert and co-founder at Boomer Benefits, where her team of experts help baby boomers with their Medicare decisions nationwide.