Maximizing the Benefits of Your Retirement Account

How To Maximize Your Retirement Savings | Bankrate

Planning for retirement is something we all need to consider. Whether you’re just starting your career or approaching retirement age, the actions you take now can significantly impact your future. Here are some effective strategies to make the most of your retirement account:

MAXIMUM CONTRIBUTIONS

One of the best ways to boost your retirement savings is by maximizing your contributions. According to IRS guidelines for 2019, here are the maximum contributions you can make:

  • $19,000 for 401(k), 403(b), Thrift Savings Plan, and some 457 plans
  • $6,000 for IRAs
  • An additional $1,000 for catch-up contributions if you’re over 50

These increased limits can help you save more efficiently, provided you can afford to contribute the maximum amount. If not, revisiting and adjusting your budget can help you find ways to allocate more towards your retirement savings.

TAKING ADVANTAGE OF MATCHING

If your employer offers a matching contribution for retirement plans, make sure to take full advantage of it. Different companies have different matching structures, such as:

  • $0.50 for every dollar you contribute, up to 3-5% of your salary
  • A flat 2.7% of your pay
  • A 100% match up to 3-5% of your salary

These matches can significantly enhance your retirement savings, so it’s wise to contribute enough to get the full match.

SEP IRA

For the self-employed, a SEP IRA offers a great way to save for retirement. You can contribute up to 25% of your income or $52,000, whichever is less. Contributions are tax-deferred until you begin withdrawals in retirement, making this an excellent option for maximizing your retirement benefits.

GIFT YOUR FUTURE SELF

Instead of spending money on holiday gifts for yourself or your spouse, consider contributing that amount to your retirement accounts. This approach leverages the power of compounding interest to grow your savings over time. For example, contributing $600 annually to a retirement account starting at age 30 could result in an additional $88,280 by age 65, assuming a 7% annual return.

BEST RETIREMENT AGE

The age at which you retire significantly affects your retirement benefits. For Social Security, you receive full benefits at age 66 and can get up to 132% of your benefits if you wait until age 70. You can make penalty-free withdrawals from IRAs starting at 59½, but it may be financially beneficial to wait until 70 to maximize your benefits.

WHERE YOU LIVE MATTERS

Your choice of residence in retirement can impact your financial well-being. Thirty-seven states do not tax Social Security income, which can stretch your retirement dollars further. Additionally, consider state and local taxes, property taxes, and taxes on other retirement income when choosing a retirement location.

BENEFIT YOURSELF

Your actions today directly influence your future retirement. Maximize your contributions, take advantage of employer matches, consider opening a SEP IRA if self-employed, and think about gifting your future self through retirement contributions. These steps can help ensure a financially secure retirement.

If you’re nearing retirement and have already made substantial progress, congratulations! Remember to choose the optimal retirement age and a tax-friendly location to maximize your benefits. By making retirement planning a regular part of your financial routine, you can fully leverage the benefits of your retirement accounts.

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