Saving Strategies Savings Strategies How much should I be saving for retirement? It’s a question many people have – and rightfully so. It’s natural to wonder whether or not you’re saving enough. Our advice is to keep it simple. For example, you may not want to rely on computer software to make projections about what you should be putting way. Programs like these consider factors like rates of return, inflation, and annual contribution rates. But, they often fail to consider real-world issues like market fluctuations, changes in contributions, and other unforeseeable events. As a result, they can be unreliable. A 1% or 2% miscalculation – played out over 20 or 30 years – can be dramatic. Instead, focus on the one thing you can control: the percentage of your income you save. We suggest setting a long-term goal of saving 10% -15% of your income. If that sounds like a lot, it’s OK, you can ease up to it. Start saving an amount that’s comfortable today, then slowly increase your savings rate annually, 1% or 2% per year, until you reach your goal. Yes, 15% may sound like a lot, but your contribution along with an employer match and a couple of relatively painless increases, can make it a reality. With patience and focus, you’ll get there. And remember, be realistic! If you’re currently not saving anything, going to 10% may be a shock to your budget and lifestyle. If saving that much feels too restrictive, you may become frustrated and stop saving altogether. And that’s certainly not what you want. There are so many choices out there. What’s the best vehicle for saving money? There is no one-size-fits-all option. It all depends on your unique situation. Do you have a retirement plan through an employer? Are you self-employed? What’s your marital status? What’s your income level? These key factors – along with a host of others – should determine the choices you make. At SecurEstate, we understand many of the tools available to you, and we’ll work with you to evaluate which ones may serve you best. By maximizing tax efficiencies and contribution amounts, a well-considered savings plan can make your money work harder for you. Here’s more information about two of the most common savings tools: 401(k) Plans – These are relatively simple and effective ways to save. If you did nothing but contribute 15% to one of these plans, you’d probably be on the right track. Be sure to take advantage of any employer matching contributions to these accounts. After all, its free money! If your employer matches dollar-for-dollar up to 6 %, you only need to contribute 9% of your income to hit your 15% target. Roth IRAs - If you’re relatively young and your employer doesn’t offer matching contributions, you should consider a Roth IRA. Unlike 401(k) plans, money put into Roth IRAs comes from post-tax dollars. However, they grow tax free. Distributions from Roth IRAs are tax free as well. That means all the growth a Roth IRA experiences over the years is never taxed. Consider the following example. If you put $5,000 a year into Roth IRA for 30 years, you’ll have invested $150,000. But at a rate of 8%, your account will have grown to $450,000. Better still, when the money is withdrawn it won’t be taxed. It’s a free-bee from Uncle Sam.* It’s easy to see why Roth IRAs are so popular. In fact, some employers have begun to offer a “Roth Option” within their 401(k) plans, making them easier for employees to take advantage of. There are a few things to keep in mind, however, when it comes to Roth IRAs. They aren’t an attractive option for people who are closer to retirement – primarily because there’s less time for them to benefit from the compounding interest. It’s also a common misconception is that a Roth IRA is a type of investment. In reality, it’s a label used for tax purposes. A Roth IRA can be invested in stocks, mutual funds, variable annuities, CDs, or other vehicles. Of course, these are just two of the tools at your disposal. Contact us and we’ll walk you through the complete range of options and develop a plan that’s right for you.*These examples are hypothetical and for illustrative purposes only. The rates of return do not represent any actual investment and cannot be guaranteed. Any investment involves potential loss of principle. Roth IRA distributions are tax-free if made 5 years after the initial contribution to the plan and you are over 59 1/2.