For Mark Roberts’ Use: Retirement planning advice abounds on the internet (and in personal talks with family and friends). Obviously, we caution you to consult with us first, before making any big decisions, so that we can help you separate fact from fiction.
But two old pieces of advice circulate regularly, that are certainly worthwhile:
- Save all you can for retirement
- Max out your retirement plan contributions each year
The first is self explanatory. No one has ever complained that they saved too much for retirement, and there’s really no such thing as being too well prepared for the unknown. Frankly, much of retirement can be unknown, especially when you factor in the out-of-pocket cost of healthcare.
As for the second piece of advice, maxing out your retirement plan contributions makes sense because it helps you take full advantage of tax breaks. If you contribute to a Traditional 401(k), your taxable income is reduced by the amount of your contributions each year, saving you even more money on income taxes. Plus, maximum contributions helps your retirement account to grow healthy and strong over the years.
This year, the maximum allowable contribution is $19,500, with an additional $6,500 “catch-up” contribution for those over age 50. But what if you’re able to save even more than that? Shouldn’t you “save all you can for retirement”? How can you divert additional funds to retirement savings?
Some possibilities are:
- Open and fund an Individual Retirement Account (IRA)
- Open and fund a Spousal IRA
- Stash money in a health savings account (if you participate in a high-deductible healthcare plan)
- Consider other investments, like municipal bonds, annuities, real estate, or cash-value life insurance policies
Because the above options can be tricky, and might carry some risk, let’s discuss them at your next appointment. If you’re already maxing out your retirement plan contributions each year, we can help you decide how to proceed with planning a successful future.