Originally published by Knoxville News Sentinel
Realizing that you don’t have enough saved for retirement can be an earth-shattering surprise. You start thinking about the vacations, new cars or lattes you’ve indulged in over the years.
Catching up on retirement doesn’t have to be an overwhelming headache, though. There are several things you can do to make the process smooth and not too stressful.
For starters, you’ll need to face the facts. If you’ve started to save, how much do you have toward retirement? If you haven’t, what are you waiting for? We recommend increasing the amount you put back based on your age and salary. By age 40, you should have twice as much as your annual salary set back for retirement, and by age 65, the amount should be eight times as much as your salary.
Remember that today, modern technology and medicine have extended our lives, so plan accordingly. When you delay your Social Security to age 70, you receive an 8 percent increase for each year past your retirement age of 66 or 67.
If your business or company offers 401(k) contributions, take advantage of them. Make sure that you are getting all of your employer’s matching funds. That is free money that you won’t be able to get anywhere else. The annual limit for 401(k) contributions for those ages 50 and older is $24,000. For those younger than 50, the limit is $18,000. Also, seeking out investments at this age is great option as you still have time for it to grow.
Funding your Health Savings Account (HSA) is also something you need to look into. When you have a deductible health insurance plan, put that money into your HSA. Tax-free distributions are typically limited to medical expenses, but many people will have extra.
If your cash flow permits, you can also contribute to IRA or Roth plans. If you’re making too much income to qualify for either, you can put your money into an investment account — just be sure that the amount you put back is one you can afford and will contribute to the lifestyle you desire during retirement.
To make sure that you have enough saved for retirement, it may be necessary to find additional means of income or minimize expenses. Picking up some freelance work or minimizing lattes from the coffee shop are great ways to save money.
Regardless of where you are on the path to saving for retirement, planning for your future now will ensure you can live a happy and fulfilling life during retirement.