7 WAY S
to save for retirement
Retirement seems like a lifetime away for young professionals. But as careers advance, families grow and milestones are met, retirement feels a lot closer. “Planning for retirement is about building a saving strategy for your working years to bridge that gap between what you need to live on to cover your desired lifestyle,” said vice president at Kennebec Wealth Management Rachel Kuss. By establishing savings goals and putting plans in motion early, you are more likely to retire on time without having to worry about money. But there are many variables to consider. A 2014 Gallup poll indicates that most Americans now retire at age 62. That is a good starting point when planning for retirement. “Basically, where we start is finding that money in someone’s budget to save,” Kuss said. “We create a budget. Sometimes we use a software that analyzes expenses. Once people can identify where they are spending money that might be unnecessary, that’s the first step.” With these saving strategies, financial planners can help individuals save more for retirement years. Raise … what raise? Workers lucky enough to get a salary increase should direct the extra money into retirement accounts instead. Since you were not accustomed to earning the money, you won't miss it. Stashing those funds into savings can help secure a strong financial future.
01
Max out deposit limits. By depositing the maximum allowable amount into retirement accounts each year, you can grow your savings quickly and earn considerably more interest.
02
Allocate your tax refund. “Some people are withholding too much money from their paycheck,” Kuss said. “They get a big refund every year after doing their taxes and they think that is a good thing. But that really means they are giving too much money out of their paychecks that could be going to savings instead. That’s a very common mistake.”
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F I N A N C I A L
Take advantage of employers’ offers to match retirement contributions. Many employers will match 401(k) contributions if you save enough to qualify. This is an easy way to save without having to put in any extra money out of your own pocket. Data indicates that many employees are leaving money on the table. A survey from Financial Engines found that $24 billion in 401(k) matches goes unclaimed every year, with the typical employee missing out on more than $1,300 annually.
04
Open a Roth IRA. A Roth IRA is a retirement savings vehicle that enables you to pay taxes on the money you put in up front. When you become eligible to withdraw the funds, they are tax-free. “Taxes are an unknown variable of the future," Kuss said. “We just never know what taxes are going to be, so Roth IRA not only do you pay regular income tax on them, but the after tax money grows tax-free forever.”
05
Aim for a 15% investment. Start investing 15% of gross income for retirement once you’re debt-free and have an emergency fund. This strategy can help ensure you have enough money to do what you want throughout retirement.
06
Make calculated cuts. Think about more affordable choices and dedicate what you would spend on those expenditures to retirement. For example, calculate the difference between buying a new car and a certified pre-owned model. Deposit the savings into retirement. Can you skip a vacation this year and do a staycation instead? Forgoing certain luxuries can help you build retirement savings. Saving for retirement becomes a little easier with strategies that can make money go further. Working with a financial planner can help individuals stay on the right track to achieve their long-term goals. Kuss says, just by taking the time to create a financial plan, many people are more likely to commit to it and follow through.
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P L A N N I N G
