Financial resolutions: Are you saving for retirement?
Financial planning services from Morgan’s Accounting and Tax Services
The start of a new year is a great time to look forward with a fresh outlook, as well as to set goals. As you think about what you want to accomplish next year, consider your financial savings habits. How much are you putting away for the future? Could you begin to save for retirement, or increase how much you’re saving? What financial actions have you put off because of lack of time?
Setting financial savings goals can be overwhelming, which may be why 31 percent of Americans report having no retirement savings or pension, according to a recent Federal Reserve Report on the Economic Well-Being of U.S. Households. Putting together a plan can make saving for the future much more manageable. Whether you haven’t started saving or simply want to challenge yourself to save more, use the following tips to make 2016 the year you focus on preparing for retirement.
* If you aren’t already saving, start now. You’re never too young — or too old — to begin saving for retirement. Whether you’ve just completed high school and are working your first job, or your career is nearly complete and retirement is in sight, determine how much you can save and which savings vehicle is right for you. If your employer offers a company-sponsored retirement plan, take advantage of the opportunity to save automatically via payroll deduction. If that’s not possible, consider opening a myRA account, the U.S. Treasury’s new retirement savings program for individuals who don’t have access to retirement savings plans at work.
* Seek opportunities to save more. If you’re already saving, that’s a great start, but you can always save more! If you earn an annual bonus, a salary increase, or even a tax refund, consider depositing it in a retirement savings account. You can contribute up to $5,500 each year to a myRA, Roth IRA, or Traditional IRA account (or up to $6,500 if you’re age 50 or older). Keep in mind that the more you save early on, the more time that principal amount has to grow interest. For example, if you have a balance of $3,000 in a savings account that earns three percent interest, adding a lump sum of $1,000 at the beginning of the year will earn an extra $30 in interest over the next 12 months, and that amount will compound even more as the years go by. Note that in 2016, you can elect to deposit all or some of your tax refund in a myRA account.
* Make a plan and follow it. Resolve to make a financial savings plan this year and review your progress regularly. As a starting point for your plan, consider meeting with a financial planner, or take advantage of free planning resources at mymoney.gov or other reputable personal finance websites. You can use the retirement savings calculator on myRA.gov to estimate how much your savings may grow over the course of five, 10, or 15 years or more based on the amount you contribute each month. By setting up regular, automatic savings from your bank account or paycheck into a myRA account, this is a New Year’s resolution you can make now and watch your savings grow throughout the year.
There are many options for saving for retirement and managing your finances. As you make your savings resolutions for 2016, do some research and determine which type of account or plan works best for you. With the New Year upon us, now is a great time to start or renew your savings habit. Visit myRA.gov for more information on how to get started.