The Future: Retirement Savings

Many of us have retirement dreams. Some of those dreams could include spending the day on the golf course, spending more time with the grandchildren, traveling in a recreational vehicle, etc.

In order to fulfill these dreams it is important that a retirement savings plan be in place. A two fold approach to a retirement savings plan is to have a goal and a strategy to achieve that goal.

How Much Retirement Savings Are Enough?

First of all, in order to save for retirement it is important to know how much needs to be saved. A general rule of thumb to the amount of retirement savings that needs to be accumulated is 70% of what a family’s take home pay is now.

However, even though this is a start, it is important to understand that there maybe extenuating circumstance or needs for the retiree. For example, as we get older we may need additional money for prescription medication. Or, if there is a wish to relocate to a locale that provides a more temperate climate there may be needed financial adjustments required. In addition, it is important to adjust for annual inflation.

How to Save

There are several ways or methods that an individual can contribute to their retirement savings. Each of these methods requires the individual to be disciplined and to consistently save over a period of time.

One of those methods is to take full advantage of any retirement plans that the employer may offer. Often, an employer will offer a 401k plan. This is a benefit provided by the employer that matches the contribution of the employee up to a certain point.

Another excellent way of accumulating retirement savings is to contribute to a Roth IRA. A Roth IRA is a retirement vehicle in which the individual contributes to their retirement account after taxes have been paid on the contributed amount. The benefit of this method of saving is that when that individual begins to draw out on their retirement they do not pay taxes.

Another important step to maximize retirement savings is when the individual files their income tax. When an individual files their income tax each year they have opportunity to claim any money given towards their IRA account. Depending upon the age of the individual, there are certain monetary limits that can be deducted by the taxpayer that represents the amount of money submitted to their IRA.

Obviously, the money has to be submitted and needs to be done prior to the 15th of April. In addition, there are conditions associated with claiming the full IRA deduction. For example, the taxpayer needs to be careful with the amount they claim if they work for a company that offers a pension program. As with anything, it is important to consult professionals when filling out tax forms.

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