If you’re getting a late start or have fallen behind with your retirement savings contributions, there are a number of options to consider.
Maximize your contribution levels
One way to save for retirement is through a structured, ongoing investment program, such as a salary deferral or automatic investment plan.
By contributing the most money permitted under your retirement plan or individual retirement account (IRA), you increase your long-term investment potential.
If your employer offers a matching contribution, take full advantage of it. Once you’re fully vested, whatever matching contributions your employer provides are yours. You can qualify for matching funds only if you make the required contribution.
Adjust your investment mix
Generally speaking, based on your investment time frame and tolerance for volatility, you can put together an investment mix that focuses on growth while providing some measure of stability.
Another factor to keep in mind is how much you’ve already saved. If you don’t think you’ve saved enough, you could consider keeping more of your assets in growth investments. However, remember that pursuing more growth generally means taking on greater risks.
Invest outside your retirement plan with IRAs
If you’ve maxed out your retirement plan contribution, consider opening an IRA. IRAs offer some of the same tax-deferred benefits as retirement plans. There are two types of IRAs: traditional and Roth IRAs. It’s a good idea to research which one best fits your financial situation and long-term needs.
If you’re married, you and your spouse may open separate IRAs. Both of you can contribute the full amount permitted by law. With a traditional IRA, you may be able to deduct a portion or all of your contributions from your income tax, depending on your income.
There are other tax-advantaged investment vehicles you can use to build up your retirement savings, such as annuities and municipal bonds or municipal bond funds.
Given the many options available, you may want to meet with a financial professional to put together an investment program that is designed to help you meet your investment goals.
Take advantage of tax incentives
Now you can contribute more to your retirement plans than ever before.
Salary deferral retirement plans
- In 2023, your plan may allow you to contribute up to $22,500 to your 401(k), 403(b) or 457 account.
- If you’re 50 or older, you can add an extra $7,500 to your company retirement plan beyond the general contribution limit for 2023.