Saving for Retirement: 4 Helpful Tips
Saving for retirement is one of the most important decisions you can make for your future. In the past, many companies provided pensions for their employees, but this practice has all but evaporated. Social security benefits can be helpful in retirement, but they may not be enough to cover all of your expenses.1 In 2017, the average retired worker received $1,404 in social security benefits each month, which works out to only $16,848 per year.2
If you want to live comfortably as you get older, it’s up to you to prepare for your departure from the workforce.3 As you start planning for retirement, be sure to keep these four tips in mind.
1. Start Saving Early
When it comes to saving for retirement, the earlier you can start, the better. People who begin saving when they are young will need to put aside less money each month since they will have more time to let their nest egg grow. Even if you are unable to save money until you are in your 40s, you will still have around a quarter of a century before retirement.4
2. Make the Most of Your Company Match
Some employers offer retirement plans that come with a company match, meaning the business will match contributions to your 401(k) or 403(b) up to a certain point. If you are eligible for one of these plans, you should make the maximum contribution possible. Your employer is essentially giving you free money, so it would be a missed opportunity to not take advantage of these funds.5
3. Know the Difference Between a Traditional IRA and a Roth IRA
With a traditional IRA, an individual under the age of 50 can defer paying income tax on up to $5,500 in contributions each year.6 People who are age 50 and over can make a total annual IRA contribution of $6,500.7 Income tax on this money isn’t due until you withdraw the funds from the account.
Roth IRAs feature the same contribution limits as traditional IRAs, but income tax is not deferred. Instead, after-tax dollars are contributed to your Roth IRA, and when you retire, the money (and any investment earnings) can be withdrawn tax-free.8 In 2018, the income range for making contributions to a Roth IRA is $120,000 – $135,000 (singles and head of household) and $189,000 – 199,000 (marrieds).9 If you are unsure which retirement account is right for you, Tennessee State Bank would be happy to talk with you.
4. Save Found Money
A great habit to form is stashing away found money in your retirement account. Whether you receive a bonus at work, a wedding gift, or a tax refund, saving this “extra” money is always a good decision.10
About Tennessee State Bank
Tennessee State Bank has been serving our local community for over 45 years. With branches in Sevier County, Knox County, Cocke County, and Jefferson County, we offer convenient banking services in East Tennessee. Whether you’re looking to open a checking account, obtain an auto loan, or apply for a home mortgage, we make the process as simple and straightforward as possible. Tennessee State Bank’s motto is “Banking at its Best!”SM, and we strive to live up to that creed every day. Let us know how we can help you by sending us a message via our Contact Form.
Tennessee State Bank is Member FDIC and an Equal Housing Lender.
1. Grabenstetter, Sasha. “Why is Saving for Retirement Important?” America Saves, 30 Jun. 2015, americasaves.org/blog/1149-why-is-saving-for-retirement-important
2. “Fact Sheet: Social Security.” Social Security Administration, www.ssa.gov/news/press/factsheets/basicfact-alt.pdf
3. Grabenstetter, Sasha. “Why is Saving for Retirement Important?” America Saves, 30 Jun. 2015, americasaves.org/blog/1149-why-is-saving-for-retirement-important
4. Glassman, Barry. “5 Best Tips to Save $1 Million for Retirement.” Forbes, 20 Jul. 2015, www.forbes.com/sites/advisor/2015/07/20/5-best-tips-to-save-1-million-for-retirement/#1fe09aa41be2
5. Friedberg, Barbara A. “8 Essential Tips for Retirement Saving.” Investopedia, 29 Nov. 2016, www.investopedia.com/articles/investing/111714/8-essential-tips-retirement-saving.asp
6. Brandon, Emily. “How to Save for Retirement Without a 401(k).” U.S. News & World Report, 27 Apr. 2015, money.usnews.com/money/retirement/articles/2015/04/27/how-to-save-for-retirement-without-a-401-k
7. Martin, Ray. “IRS allows higher retirement savings account limits for 2018.” CBS News, 24 Oct. 2017, www.cbsnews.com/news/irs-allows-higher-retirement-savings-account-limits-in-2018/
8. Brandon, Emily. “How to Save for Retirement Without a 401(k).” U.S. News & World Report, 27 Apr. 2015, money.usnews.com/money/retirement/articles/2015/04/27/how-to-save-for-retirement-without-a-401-k
9. Martin, Ray. “IRS allows higher retirement savings account limits for 2018.” CBS News, 24 Oct. 2017, www.cbsnews.com/news/irs-allows-higher-retirement-savings-account-limits-in-2018/
10. Tayne, Leslie. “5 ways to catch up on retirement savings.” USA Today, 19 May 2017, www.usatoday.com/story/money/personalfinance/2017/05/19/retirement-tips-saving-investing-401-ira/332098001/