3 Benefits as You Start Saving for Retirement
Hidden within the Social Security Administration’s (SSA) website is some startling news as you start saving for retirement: “The projected point at which the combined trust fund reserves will become depleted, if Congress does not act before then, comes in 2033 — the same as projected last year. At that time, there will be sufficient income coming in to pay 77 percent of scheduled benefits.”
In other words, your future financial security has been placed in lawmakers’ hands. These are the same lawmakers whose conflicting opinions have shut down the United States government 17 times since 1976 (most recently in 2013). While the government may come up with a solution to slow the depletion of the Social Security trust fund, it’s imperative that you start saving for retirement today through alternative means. To get you started, here are a few tips to help you make the most of your retirement funds.
1. A Retirement and Emergency Fund
With a Roth IRA, you are not only saving for your future, but you are also contributing to a last-resort emergency fund. This particular retirement savings account allows you to contribute after-tax income and grants you the ability to withdraw your contributions penalty-free. While it’s in your best interest to leave your interest-earning money untouched for as long as possible, it’s also nice to know that you’re building up a last-resort emergency fund in case disaster strikes.
2. Don’t Turn Down Free Money
Some companies offer employer-sponsored retirement plans that match your contribution, such as a 401(k). Depending on your company’s plan, your own contribution to your retirement savings could be matched up to a certain percent (typically between 1 and 6 percent), giving your money a return in difficult financial times. Browse through your employee handbook or pay a visit to human resources to inquire about this employee benefit and the requirements to join.
3. Beef Up Your Tax Return
Your retirement savings can also help put more money back into your pocket come tax season. Here are two ways your retirement savings can earn you more money that you can put aside for the future.
- Contribute to a Traditional IRA
A traditional IRA is an individual retirement savings account where you contribute pre-tax income. Depending on your income and whether or not you have an employer-sponsored plan, your contributions to a Traditional IRA may be tax-deductible.
- Contribute to a Qualified Retirement Plan
Most retirement plans are considered qualified, such as an IRA or a 401(k). If you’re in a lower tax bracket (an adjusted gross income of less than $27,750 for single filers, less than $41,625 for head-of-household filers, and less than $55,500 for married, joint filers), you can get a credit of up to 50 percent of your retirement contribution.
While it’s disappointing that the SSA won’t have enough funds to grant you 100 percent of your retirement benefits by 2033, there are ways you can be proactive. Gain some peace of mind by using these tips to start saving for retirement today. With so many fringe benefits available to you, it would be a shame not to do so.