No matter what stage of life you’re in, eventually you’ll retire.
Whether you plan to work part time, spend time with family, travel, pursue your passion
or give back, you’ll want to be prepared when that day arrives.
Taking smart financial steps today can help give you
the freedom to pursue the life you want later.
When saving for the future, there are three key steps that can help:
1. Start early.
2. Take advantage of retirement savings options with tax benefits.
And 3. Save as much as you can.
Step 1 is to start early.
Time is your biggest ally when it comes to saving for the future.
That’s because of the power of compounding, which gives your money the potential
to multiply through earnings on any earnings.
The sooner you start, the more compounding is likely to help your money grow.
For example, if Maria and Robert both save $200 each month in their 403(b) plan,
but Maria starts at age 25 and Robert waits until age 35,
Maria’s nest egg will be more than $187,000 greater than Robert’s by age 65,
assuming a 6% annual return, even though she contributed only $24,000 more than he did.
The second step for your future is to take advantage of
retirement savings options with tax benefits.
Your employer’s retirement plan is one of the best savings vehicles around.
That’s because you contribute directly from your paycheck on a pretax basis,
which can lower your taxable income.
And the amount you contribute—including any earnings—won’t be taxed until you
start withdrawing the money in retirement.
If your employer offers a Roth option, you can contribute with after-tax dollars.
While you won’t get a current tax break, you’ll be able to withdraw your money,
including any earnings, tax free when you retire.
Roth accounts may provide the most benefit for people
who expect to be in a higher tax bracket when they retire.
The third step is to save as much as you can.
As a rule of thumb, many experts recommend saving between
10% and 20% of your gross salary for retirement.
You can start with a small amount and then increase the amount as your salary goes up.
If your employer matches part of what you save,
consider contributing at least enough to get the full match.
If you don’t, it’s like turning down free money from your employer.
For example, if Susan contributes 6% of her salary to her retirement savings plan
and gets a 3% matching contribution,
after 25 years that’s almost $80,000 more for her retirement.
If you need help with savings strategies for your future,
you’ll find lots of tools and resources online at TIAA.org,
and TIAA financial consultants are available to help you at no additional cost.
Call to schedule an appointment today.