The Best Ways to Stretch your Retirement Savings

It’s really not all that difficult to start saving for retirement, even though many American consumers don’t. Simply take part of your weekly paycheck and put it into either a retirement plan like a 401(k) sponsored by your employer or, conversely, set up your own IRA.

As consumers get older however, they start looking at their retirement savings and wondering what measures they can take to increase their “nest egg” as much as possible so that will last as long as possible during retirement.

Below are a number of ways to do just that, and stretch those retirement savings as far as possible. Enjoy.

The first is simply to start. In fact, that’s the hardest part for most people, starting a retirement plan of any kind. Your best bet is to have the funds automatically withdrawn from your weekly check and put into your retirement plan automatically so that you don’t ever see that money or get a chance to spend it.

Another excellent method is to start using the “catch-up” contribution that the IRS allows you to put in your 401(k), which is $5500. In an IRA it’s another $1000  and, if a person starts using this contribution at 50 years of age, putting in the maximum $23,000 in 2014 (the $17,500 regular contribution plus the $5500. catch up contribution), that will grow to over $56,000 by the time they reach 65.

Consumers who expect that their tax rate will increase in the future as their income increases should consider contributing after-tax money into their Roth IRA or Roth 401(k). For consumers who are eligible, both will provide a tax free stream of retirement income.

You might also want to consider taking money from a traditional IRA and converting it into a Roth IRA. Yes, you will have to pay taxes now but you won’t have to pay later and, because of that fact, you will more than likely end up saving money, especially if you end up in a higher tax bracket in the future.

Of course one of the best ways to increase your retirement income is simply to work longer, which means that rather than taking money out of your retirement plans, you will be able to keep putting money into them.

For example, retiring the age of 68 rather than 62 will give you 6 more years of paychecks to pay your bills and other expenses as well as allowing you to put more money into all of your retirement accounts. Working longer doesn’t mean that you need to say the same job either. Many American consumers go into “encore” careers and use skills that they picked up during their first career in order to keep making money but also enjoy themselves, and their work, more.

Moving to a more tax-friendly state is also one of the best ways to stretch your retirement funds. For example, there are 7 states that have no income taxes at all, and many have exemptions from retirement income.  Kiplinger’s puts out a list of tax-friendly states every year so, if you’re considering moving to another state to save money, that’s a great place to start.

Those are some of the best ways to increase and stretch your retirement savings.  If you have questions about retirement please drop us an email or leave a comment and we’ll get back to you with answers and advice.

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