Today is the fourth in a series of posts focused on America Saves Week. Yesterday we talked about saving automatically. Today’s focus is saving for retirement.
While I won’t get into politics and I don’t pretend to understand the ins and outs of social security, I do know that I want my husband to retire on time, I need to save for retirement. I also want to say that any tax-related advice I offer is purely my own opinion. You should check with an accountant or the tax laws to make sure what I say is still true.
How to Do It
Participate in a work-related retirement program or open up a Roth IRA
Already saving? Increase the amount you save toward retirement by 1% in 2013. If possible, max out your work-related retirement program contributions to ensure you’re taking full advantage of your employer’s contributions.
Your work-related retirement program and the ROTH IRA are currently tax-deductible if you do one or the other. In my case, contributions made by myself to a ROTH IRA or regular IRA are tax-deductible since I am a non-working spouse. My husband’s IRA contributions are not tax-deductible because he contributes to a plan at work.
Set up a separate savings account for retirement
While your ROTH IRA is controlled by you, you may be limited by the types of investments you can make with the fund. My husband and I have a separate mutual fund set up for retirement which was funded by an inheritance. This fund is available at any time. We can make large contributions to it while the ROTH IRA has yearly contribution limits. The ROTH IRA has some limits and restrictions on withdrawals which need to be discussed with an accountant.
Save for retirement before saving for college for your children
While we all would like our children to leave college without student loan debt, this needs to be done without sacrificing our retirement savings. My husband and I have 529 plans for our 5 children. We put less money into the 529 plans than we do into the retirement plans.
Keep control of your retirement savings.
Don’t leave money in 401 (k) at old job. These days it’s simple to roll over an old 401 (k) into a new one or into an IRA that you control. Figure out what you’ll need for retirement. For me, this is the hardest part. Honestly, my husband and I have not sat down and figured out what we’ll need for retirement. That will be a tough conversation. I’ll keep you posted.
Tomorrow: Save for a Large Purchase
Barb is a mom of 5 kids who spends her day keeping track of socks, stuffed animals, library books, and a 4 year old when she isn’t writing about all the frugality, gardening, cooking, and reading she manages to fit in between the chaotic moments. She can be found at A Life in Balance, Frugal Local Kitchen, or on Twitter with daily doses of life in 140 characters or less.