1. Plan to save
First, set a realistic retirement savings goal. Take into account how many years your retirement will last, what you want to do when you retire, and how much you will need for each year of your retirement.
Next, schedule your savings. Depending on what works best for you, commit to saving a certain amount every year, every month or even every week for your retirement. Stick to your schedule.
Lastly, regularly review your savings goal and schedule to make sure you’re still on track.
2. Start saving now
It’s easy to put off saving for retirement to another day. The earlier you start; however, the more likely you will save enough for retirement. By starting sooner rather than later, you will also benefit more from compounding (earnings on previous earnings).
3. Participate in your employer’s plan
Start participating in your employer’s retirement plan as soon as you can. If the plan allows you to contribute to the plan from your wages, contribute as much as you can up to the plan limits, which for 2016 are:
- $18,000 to 401(k) or 403(b) plans
- $12,500 to SIMPLE plans
If your employer doesn’t have a retirement plan, ask if one can be started.
4. Contribute to IRAs
Contributing to Individual Retirement Arrangements is a simple way to save for your retirement. For 2016, you may be able to contribute to a traditional or Roth IRA the smaller of:
- $5,500 ($6,500 if you are age 50 or older), or
- your taxable compensation for the year.
5. Avoid early withdrawals
Your retirement savings are for when you retire. To maximize the amount available when you actually retire, avoid taking money out early from retirement plans and IRAs. Remember that you usually have to pay an additional 10 percent tax on the amount of money you take out of your plans or IRAs before you reach age 59½, unless you qualify for an exception.
Some Helpful Resources:
- Saving for retirement – information on saving for retirement, including how changes in your life can affect retirement planning.
- Types of retirement plans – information on various types of common retirement plans, including how much you can contribute per year.
- Retirement Plans FAQs – answers to common retirement plan and IRA questions.
- Retirement Saving Tips for Individuals – help on saving for retirement and understanding your employer’s retirement plan.