How to maximize your retirement savings

Jenny Handwerk |

How to maximize your retirement savings

Saving any amount for retirement is beneficial; consider contributing the maximum amount  to your IRA or company retirement plan. It would help to accumulate short-term savings so you do not have to dip into your retirement funds for emergencies. If you are 50 or older, now may be the time to make a catch-up donation. Saving today can dramatically boost your retirement savings.

Whatever job route you pick, you'll want to know how to maximize the benefits of future planning.

For example, many of your costs will remain when you retire from your first job. There are still regular payments to pay and unforeseen expenses that can arise at any time. Don't worry. Maximizing retirement funds allows you to make the most of your next chapter.

Here are some ways that can help you figure out how much to save for retirement, what proportion of your income should go toward retirement, and how to replace your pay when you get there:

Grab the 401(k) or 403(b) Company Match

If your employment has a retirement plan with a corporate match, you should contribute up to the amount the company matches. Contribute the maximum amount allowed by law to your retirement savings accounts to maximize your retirement benefits. Begin today for the most significant financial reward.

Start protecting your income with a diversified retirement plan.

While saving for retirement, it's critical to diversify your assets across many types of investments to reduce your exposure to market risks. The same approach applies to taking income in retirement: developing an income plan that incorporates money from several sources will assist you in covering the expected and unexpected risks associated with retirement.

Use your employer's company match.

An additional benefit of workplace plans is the company match. Many firms offer to match a percentage of an employee's contribution to their retirement plan, a benefit everyone should take advantage of. Experts describe the match as "free money."

Consider making the maximum contribution to your health savings account.

Plan to save extra—and separately—for healthcare expenses in retirement. If you have an HSA-eligible health plan, consider using one. With an HSA, you can frequently divide your contributions between invested money (which can be used to save for long-term healthcare expenditures in retirement) and cash (so you can pay for qualified medical bills directly from your account). Contributions can result in three tax benefits: an initial tax deduction, tax-free future earnings, and tax-free withdrawals when used for eligible medical costs.

Claim Double Retirement Plan Contributions

A little-known retirement savings opportunity permits some teachers, healthcare workers, public sector, and nonprofit employees to contribute twice as much to retirement plans thanks to catch-up provisions. These provisions apply to some 457(b) and 403(b) plan participants. Details are available on the Internal Revenue Service (IRS) website.


Create lifetime income 


With pensions becoming obsolete and Social Security providing only a part of preretirement salaries, more individuals are turning to annuities as guaranteed income for the rest of their lives. A diversified retirement plan that incorporates lifetime income from both fixed and variable annuities can provide you with consistent, dependable income for the rest of your life—as well as the possibility for future gain.


Making non-deductible IRA or Roth IRA contributions

If you meet the other requirements and have earned income, you can make the maximum contributions to both an IRA and an employer-sponsored plan, such as a 401(k), in the same year. That being said, you might not be able to deduct your traditional IRA contribution, depending on your income level. You must file IRS Form 8606, Non-Deductible IRAs, together with your tax return in order to document any non-deductible traditional IRA contributions you made. 

Roth IRAs have income limits, regardless of whether you have an employer plan. Distributions from a Roth IRA are generally tax-free (rather than tax-deferred), assuming certain conditions are met. If your income is too high to qualify for a deductible or Roth IRA contribution, consider establishing a non-deductible traditional IRA instead.

How Much Money Should I Save for Retirement?

The amount of money you should save for retirement is determined by various factors, including your health, present lifestyle, future lifestyle, and any responsibilities you may have. Experts generally recommend that your monthly income in retirement be between 70% and 80% of your previous job's salary.