Increasing your tax-deferred retirement savings
When saving for retirement, many people use tax-deferred accounts to help grow their wealth while minimizing their tax bills.
A tax-deferred account is a type of savings account that allows you to receive immediate tax deductions up to the full amount of your contribution. However, these are generally taxed when you make your withdrawals during retirement. Examples of a tax-deferred account include 401(k) plans and traditional IRAs.
The advantages of this strategy versus a tax-exempt account is that you pay less in taxes now and, if you expect to be in a lower tax bracket in your retirement, you will owe less in taxes on your withdrawals too.
If you dream of having a comfortable and long retirement, you need to work on increasing your tax-deferred retirement savings. Take a look below for some strategies that can help.
Strategies for increasing tax-deferred retirement savings
- Maximize your contributions — As of 2020, people under the age of 50 can contribute up to $19,500 in a 401(k) account. Those 50 and older can contribute up to $26,000.
While it is not always possible to contribute up to your annual limit, you should strive to get as close as possible, especially if your employer offers matching contributions. You should at least save the maximum amount that your employer will match so you are not leaving any “free money” on the table that you can use for your retirement.
- Sign up for automatic saving — Have your retirement contributions be automatically deducted from your salary so you do not have to remember to make the contributions yourself. This also helps you build a steady budget for your expected post-contribution paycheck instead of guessing each month what you will have left over.
- Diversify your investments — Choose a combination of investments that grow aggressively and investments that grow slowly and steadily.
Investments that grow aggressively are more risky and vulnerable to loss, but they can help you build up more wealth for your retirement.
Investments that grow steadily and slowly over the years are less vulnerable to volatile markets, but they do not generate as much wealth as aggressive investments.
A diversified blend of investments that lean more heavily toward conservative or aggressive depending on your risk tolerance can help you reach your retirement goals and survive a variety of economic climates.
Talk to a ProVise CFP® professional about getting the most out of your retirement savings
Many people dream of having a comfortable retirement, but not everyone knows how to get there. A financial advisor can work with you to act as a guide and build a road map for your savings strategies to help you reach your retirement goals.
At ProVise Management Group, our CERTIFIED FINANCIAL PLANNER™ professionals can get to know you and your current financial circumstances, goals, risk tolerance and personal values to help you develop a plan that works for you. We can also create a written plan for you at a fiduciary standard of care. All our written plans come with an unconditional money-back guarantee. If you are unhappy with your written plan, you can return it to us, and we will refund 100% of the fee paid.
Are you ready to talk to a professional about planning for your retirement? Contact ProVise today to schedule a complimentary consultation.