Five strategies for retirement planning

The best time to start preparing for retirement is today.

Check out these savings strategies to help you evaluate your plan for retirement – and enjoy the peace and relaxation of your golden years.

1. Diversify your savings

   You’ve probably heard the phrase “don’t put all your eggs in one basket,” and this remains true with your retirement savings. A diversified savings ensures you can withstand any hurdles.
   
   A good start is your employer’s 401(k), but there are options independently with a Roth IRA or a Traditional IRA. The main difference between these two accounts is the income tax treatment on the funds within the accounts.
   
   With a Traditional IRA, you pay taxes when you withdraw the money for retirement. Traditional contributions may be tax-deductible and taxes are deferred until you begin withdrawing funds. With a Roth IRA, you pay the taxes when the money goes into your account. Your advantage with a Roth IRA is tax free earnings and qualified withdrawals are free.
   
   There is a certain income level where you can no longer contribute to a Roth IRA. If you’re in a lower income bracket, a Roth IRA is the best current option, but as your career and family changes, there might come a time to consider shifting to a Traditional IRA.
   
   Depending on your income, you may not qualify for a Roth IRA – once you hit a certain income level (either individually or as a couple), you are no longer able to contribute to a Roth IRA. The decision between the two accounts should also be based on where you fall in the tax bracket, which is likely dependent on your current situation. If you’re currently in a low tax bracket, then a Roth IRA will be the best current option for you. This will change as you and your family develop. When you reach the higher tax bracket, you should consider shifting to a Traditional IRA. Finally, in the case that you have a 401(k) with your current employer, a Roth IRA will be the better option due to the possibility that you will be unable to qualify for a tax deduction on a Traditional IRA.

2. Track your progress

   Putting your ongoing retirement savings on autopilot is normal, as most people set up automatic and periodic transfers. However, it is still beneficial to continually track your savings progress. This can range from checking your progress on a retirement calculator to meeting with a financial planner to plot out your strategy. Be sure to continually verify that you’re on track to reaching your goal. In addition, regularly review your retirement plan to ensure it remains on track with your goals and can adjust for any unexpected life events or market conditions.

3. Don’t derail your 401(k)

   Changing employers can be stressful, especially when determining what to do with the funds invested in your existing company’s 401(k) plan. Generally, you can leave the money in the current plan, transfer it to your new employer’s plan, or roll it over into an IRA. If you choose to keep your plan with your old employer, you may lose some perks. Funds left in your former company’s plan cannot be used for loans. Additionally, it is easy for investors to lose track of investments left in old plans. To roll over an old 401(k) account, contact the new company's 401(k) administrator for the details about your new account. Send this information to your old employer to transfer the funds directly to the new plan. This process, called a direct rollover, is straightforward and transfers the full balance without taxes or penalties.
   
   An indirect rollover is a riskier method where your old employer sends you a check made out to you. This method involves mandatory tax withholding, with the company required to withhold 20% of the funds for federal taxes.
   
   Before deciding what to do with your old 401(k), make sure you fully understand your available options.

4. Learn to start saving

   Your 20’s to 40’s are the most expensive years of your life, and it can be difficult to remember to save for the future while trying to make ends meet. Still, you shouldn’t let retirement be on the back-burner of your budget. Setting up an automatic allocation of money to your retirement fund can teach you to live without it, and you’ll be happy when you reach your golden years. Saving money early means you can contribute smaller amounts more often, making the process easier to manage. Additionally, it is a cushion for unexpected expenses and gives you more flexibility in your retirement planning, ensuring you can have a comfortable future.

5. Minimize your debt

   Doing this is beneficial on all levels of finance, but especially so when it comes to your retirement. Decreasing your debt will give you more funds and less stress on your budget as you approach retirement age. Loan payoff strategy differs from person to person, so find what strategy works best for you.

Adopt these successful savings strategies to ensure that your golden years stay golden, and when you have questions when it comes to retirement savings, we are here to help!