Getting ready for retirement is a difficult time for all workers. When you’ve never done it before, it can be hard to figure out how to save for it, apply for benefits, and make the most of it. This is especially true in the first few years. No one can tell you exactly what will happen until it does.
It’s easy to make mistakes because of this. In fact, study shows that 61% of Americans fear retirement more than death itself. Making a good plan for your money that will help you in the future is very important, so get ready and read some tips that will help your retirement go better.
Figuring out the limits of your contribution
To keep up with inflation, the Internal Revenue Service (IRS) changes the limits on how much people can put into job retirement plans like 401(k)s every year. The 401(k) limit in 2024 was $23,000, or $30,500 if you were over 50.
If you count employer matches and profit sharing, the total cap was $69,000. Everyone is limited to the same amount, and you’ll need to split it up among all of your employer-sponsored plans since they usually give you tax breaks.
The Benefits of an IRAIndividual Retirement Accounts (IRAs) are another popular addition to retirement plans at work. However, you still can’t put as much money into an IRA as you’d like. The biggest amount you can put in is $7,000 in 2024, plus an extra $1,000 if you’re over 50.
IRAs come in two types: t
raditional and Roth. Traditional IRAs give you tax breaks right away, while Roth IRAs let you take money out tax-free when you retire. It’s important to choose the best choice for you.
Options for self-employment
Self-employed people can also save for retirement in a number of ways, such as with SEP-IRAs, not just through standard workplace retirement plans. You can put up to 25% of your salary into these, but the most you can contribute in 2024 is $69,000.
401(k)s that aren’t matched by an employer give the same benefits, plus extra contributions for people over 50.
Self-employed people have the advantage that each business they start could have a different type of retirement account. This lets them save the most for retirement while still keeping control over their investments.
Take care of your money when you leave.
Spread out your bank accounts so that some of them are tax-advantaged and some are not. This is the most important thing you can do to get ready. This will help some people put in more money, so there is more money to grow. It will also let some people take money out without having to pay taxes on it.
It might seem like having both types of accounts is unnecessary since the best way to make sure that more money grows is for every account to be tax-advantaged. However, having both types of accounts will be useful in case tax rates change. They also give you options for how to handle your taxes when you leave.
It’s also a good idea to make sure that your investment portfolio is properly diversified by having a number of different accounts and asset allocation methods.
This will keep the general risk of the portfolio low while still letting you invest some money in needed assets that will give you a bigger return if things go well. You will also be able to make sure that the investment strategy for each account fits the goals you are trying to reach at the time.
The last thing you need to do before you quit is plan how the money will be spent and when to take money out of each account. So make sure all of your accounts are set up. Keep in mind that many tax-advantaged accounts will have required minimum payments (RMDs)
that you will have to follow. This is something you should think about if you want to get the best tax results and have a more stable income in retirement.
