You’ve heard it all before: the average American spends 20 years in retirement yet more than half of all Americans (57 percent) have less than $25,000 saved for retirement, according to the Employee Benefit Research Institute.
If you want to have a joyful retirement, full of travel and culture and all the things you put off while you were working, you need a plan.
“You have to take responsibility for saving outside of your company’s retirement plan,” says Carolyn Jones, vice president of Fidelity Federal Savings and Loan Association in Delaware, Ohio. Founded in 1887, Fidelity Federal has seen all the ups and downs of the market, and has helped generations of Central Ohioans save for retirement.
Here are 6 tools you should consider for your dream retirement.
1. Make a plan and stick to it. Nothing eases the road to retirement better than planning as far in advance as possible. Calculate how much you’ll need to retire and then how much you need to save to achieve that goal.
2. Realize the full potential of your employer-sponsored 401(k) or 403(b). If your employer offers a match, it’s like getting free money, so max it out.
Suppose your employer offers to match the first two percent you contribute. Make sure you contribute the full two percent. Then go beyond that and watch your savings grow. The contributions come directly out of your pay, so you never miss them. Plus, they are pretax and tax deferred.
3. Invest in an IRA. Join the 43 million Americans holding $5.2 trillion in tax-advantaged individual retirement accounts, according to the Government Accounting Office. Contributions to traditional IRAs may be tax deductible – depending on your income – and grow tax-deferred. “You’re never too old or too young to start saving,” says Fidelity Federal’s Carolyn Jones.
4. Consider a Roth IRA. The tax advantage of a Roth comes on the other end – when you withdraw your savings. You may not pay taxes on any of the earnings that your contributions have generated.
Holders of Roth IRAs can withdraw earnings as part of a qualified distribution, tax-free and without penalty if five years have passed since you established your first Roth IRA and you are at least 59.5 years old. You can withdraw earnings early without penalty for a number of reasons including, but not limited to: disability or for a qualified first-time home purchase.
Jones points out that IRAs through Fidelity Federal are FDIC insured up to $250,000 and come in a variety of terms to fit your personal savings plan. IRAs are insured separately from your regular savings accounts. There is a limit on contributions to both traditional IRAs and Roth IRAs of $5,500 a year, or $6,500 if you’re over 50.
5. Postpone retirement. What?! Work…more? Well, sure. We’re living longer and healthier than ever before. The longer you work, the more you earn, and the bigger the check from Social Security. A retiree with average annual income of $55,000 collects $1,117 a month if they retire early at 62, $1,546 a month if they retire at 65 and $2,147 if they wait until age 70. That’s a difference of $12,360 a year.
6. Diversify your investments. No one knows what’s going to happen to the economy, so make sure you are spreading your risk. Invest some of your retirement savings in the stock market, which offers the reward of high return and the risk of losses. Invest some of it in other kinds of investments, like real estate, bonds, etc. And invest some in savings that have guaranteed rates of return.
Spend your golden years in style – buy that boat, take the dream vacation, buy season tickets to the symphony. Whatever constitutes your dream, you can achieve it if you plan and save. Fidelity Federal Savings and Loan can help with your retirement savings. To learn more about retirement planning, visit fidfedsl.com or call at 740-363-1284.