Tax season is once again upon us. And while H&R block is reminding you and the rest of America to “get your billions back” by filing your taxes, you should be reminded of another important step to take this time of year – maximizing your retirement savings.
With concerns over the continued viability of Social Security benefits, in the years ahead, Americans will have to assume more responsibility for their retirement savings. Yet data released in a number of 2014 research studies indicates that as much as 30% of U.S. workers have no money set aside for retirement. And many who have saved, will likely not have enough.
Less taxing retirement savings.
Whether you have an established retirement savings program or have yet to get started, now – in the season of taxes – is the ideal time to think about building that all-important nest egg. You can start by following these helpful tips:
- Enroll in a plan. Does your employer offer a retirement plan, such as a 401(k) plan? If so, enroll in the plan as soon as you can. If you have to log a number of years of service before you become eligible or if your employer does not offer a plan, Uncle Sam has provided you with a smart alternative – Individual Retirement Accounts (IRAs). You can choose from a Roth or Traditional IRA. The option that’s best for you depends on whether you seek to have tax benefits today or in retirement. Your tax advisor can help you choose the option that meets your unique needs.
- Pay yourself with retirement savings. The best way to accumulate assets for your plan is to contribute to your plan early and often. With the power of compounding interest, early retirement savers can build savings quickly. You can arrange to have a certain percentage of your pay or fixed amount of money automatically saved for your retirement. As your income starts to rise, consider upping the percentage you contribute each pay period. You’ll be amazed at how quickly your savings will add up.
- Capitalize on employer matches. As part of their benefits packages, many employers offer matching contributions to retirement plan participants. If your company offers this benefit, be sure you contribute enough to capitalize on the full benefits of the match.
- Know your company’s vesting schedule. If your company contributes to your plan, you may have to wait a certain period of time before your retirement assets become fully available to you. So if you leave a company before that period of time, you could be leaving a lot of money on the table. Make sure you are familiar with your company’s vesting schedule before you make any moves.
- Leave it alone. As your retirement nest egg begins to amass, you may be tempted to access your funds for non-retirement purposes. Making early withdrawals will not only result in loss of principal and interest, but also could result in significant tax penalties.
- Get professional assistance. The money you save for retirement can be one of your biggest assets. While managing those assets, you will have to make many choices and decisions. It’s never a bad idea to sit down with a retirement specialist to navigate the choices available to you. At DNB First, we’d be happy to review your options and circumstances with you.
Make your retirement savings plan today.
As your preparing your taxes this season, take a moment to prepare for your retirement savings plan. You may not get billions back in retirement, but you’ll be in a good position to live a comfortable retirement. And that, America, is priceless.
Vince Liuzzi serves as Executive Vice President and Chief Banking Officer at DNB First.