Planning for retirement isn’t a luxury that only the wealthy
can afford. In fact, the less we earn the more important our retirement savings
becomes to our futures. While we need our income now for day-to-day essentials,
we’ll need it more once we retire and have fewer opportunities to earn.
Social Security will help some, and so might other benefits
such as a pension, if you have access to them. But the most reliable way for
anyone to secure their own future is by planning for it now. And we can all do
that, even if income is modest.
1. Max Out Every Available Tax Break
Every dime that you contribute to a traditional 401 (k) plan
or an IRA is tax deferred. This means that you won’t pay taxes on the amount
you contribute until you’re ready to begin withdrawing at retirement.
When you make contributions and defer taxes on those
dollars, you’re reducing your overall taxable income. Better yet, you can make
last-minute contributions right before tax time in April, according to Huffington
Post, and still claim tax savings.
2. Make Saving for Retirement an Automatic Thing
It seems like the less money you have the more acutely aware
you are of every dollar that’s earned and spent. When contributions are
something you think about every month, there are at least 12 chances per year
to make a poor choice. More, when you factor in weekly or bi-weekly paychecks.
Automatic deductions take the decision making process out of
the equation. It might pinch a little at first. But chances are, you’ll settle
into it. In time, you might rarely think about those deductions at all. Except,
of course, when you realize just how much you’ve saved.
3. Resist the Tax Refund Temptation
Tax refund time is an opportunity to save or spend. For many
people, a nice refund offers the means to buy things, such as a new TV or
computer, that aren’t in the usual budget. And before too long, the whole
refund is gone. Saving instead of spending is a better choice.
If you can’t save your whole tax refund, consider saving half. U.S.
News Money says the IRS form 8888 not only lets you take a direct deposit
option to your checking or savings account, but also lets you send your refund
directly into an IRA. You can even send part to checking and part to an IRA.
4. Set a Goal
It is a proven that setting a goal provides
motivation. This is true of saving for retirement as well. No
matter how old or young you are, it can be a great idea to use a retirement
calculator to find out how much savings you will need to live the life you
want in retirement.
Knowing what you need and setting a goal is perhaps the best
way to save for retirement. Get saving and saving the right amount.
5. Increase Your Savings Rate Every Year
Another best way to save for retirement is to increase how
much you save every year.
Just as saving automatically takes some of the emotion out
of making deposits into a retirement
plans account, so can increasing the amount that you save by a small
percentage every year. Some 401 (k) plans offer an automatic savings rate
increase. If yours doesn’t, U.S. News Money explains that you can still make
that choice on your own.
An automatic increase might sound difficult when you’re
already saving every penny that you can afford. But there are so many ways to
cut back to make it possible. Changing cell phone, cable, or Internet plans
could offset the difference so that you don’t feel it at all.
The most reliable source for retirement income is you.
No one else has your best interest as much at heart, and no one is in a better
position to offer the security that you need. The sooner you start, the better
off you’ll be.
New Retirement has tools that help with saving,
investing, and planning for retirement. Whether it’s decades away or closer
than you’d like to admit, one day you’ll no longer be in the workforce. Try our Retirement
Calculator and learn what you need to prepare for it.
[Source: http://www.newretirement.com/blog/2015/05/28/5-ways-to-save-for-retirement-on-a-limited-income/?nabe=6690247808122880%3A0]
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