Your Guide to Retirement Planning

Preparing for retirement requires consistent savings, prudent investment, and successful avoidance of penalties and benefits. You can build a nest faster if you take advantage of workplace retirement benefits and make optimal use of government programs, including Social Security and Medicare.

Here’s how to make a basic retirement plan:

– You save regularly when you plan to retire.

– Increase your match to 401 (k).

– Take advantage of tax breaks for retirement planning.

– Open the IRA.

– Carefully choose the distribution of pension investments.

– Minimize benefits in your pension accounts.

– Use retirement planning tools to help you plan financially.

– Increase your social security benefit>.

– Apply for Medicare on time.

– Make a plan of the estate.

Save regularly when planning your retirement

The key to retirement planning is save a portion of each salary starting as early as possible in your career. Meghan Murphy, vice president of Fidelity Investments, recommends saving 15% of your retirement salary each year. If you can’t save that much, save a smaller amount, then increase it each time you get a raise.

“A 1% increase can mean $ 30 or $ 40 for each payout period,” Murphy says. “If it’s in line with a raise or salary increase, you don’t even run out of money because you didn’t have it to begin with.”

[Read: How to Max Out Your 401(k) in 2021.]

Increase your match to 401 (k)

If your employer provides a 401 (k) match, save at least enough to get it maximum possible match 401 (k).

“If you match 50 cents to a dollar, up to 6% of your salary, choose 6% of your salary,” says Allison Vanaski, a certified financial planner for Arcadia Wealth Management in New York City. “You’ve just made a 50% return on your money by contributing a bit of every salary, and that’s in addition to what the investment will earn over time.”

Take advantage of tax breaks to plan for retirement

You can defer paying income tax up to $ 19,500 in 2021 by contributing to the traditional 401 (k) plan, and that amount jumps to $ 26,000 if you’re 50 or older. Income tax will not be paid on this money until you withdraw it from the account. Alternatively, you can top up the post-tax dollar for the Roth 401 (k) and prepare for a non-tax retirement.

Low- and moderate-income workers saving for retirement may additionally be able to qualify for tax credit savers. These tax breaks give you an extra incentive to save money for the future.

[See: How to Reduce Your Tax Bill by Saving for Retirement.]

Open the IRA

If you don’t have a 401 (k) plan at work, consider saving in individual pension account. The IRA offers similar tax breaks as Plan 401 (k), but is not tied to your business.

The traditional IRA contribution limit is an IRA of $ 6,000 in 2021, or $ 7,000 if you are 50 or older. Workers earning below certain marginal incomes can save in 401 (k) and IRAs the same year. You can also switch your pension savings from 401 (k) to an IRA each time you change jobs to make it easier to manage your pension finances.

Carefully choose the distribution of pension investments

Retirees must choose a cheap combination of stocks and bonds that suits their risk tolerance. Young savers have many years to recover from the stock market crash, so they can generally take a higher risk. Many people are gradually moving to more conservative investments as they approach retirement.

“You should become absolutely more conservative over time, but you need to make sure that as you become more conservative, you don’t do so at the risk of your purchasing power, your ability to outpace inflation over time,” says Benjamin Beck, a certified financial planner and chief investment officer at Beck Bode in Dedham, Massachusetts. “For your income to last for the rest of your life, you have to participate in the markets.”

Reduce benefits in your retirement accounts

Fees reduce the return on your investment and make it harder to build a retirement nest. Remember to compare benefits when choosing a pension investment. Even a 1% fee can cost you tens of thousands of dollars over 30 years.

“Fees for 401 (k) can range widely, and minimizing investment fees means savers have fewer withdrawals for long-term returns,” says Christina Empedocles, a certified financial planner for Insight Personal Finance in San Francisco. “If benefits approach 1%, it could be more productive to invest retirement savings dollars in cheap, highly diversified index funds or ETFs in a single pension account.”

[See: 9 Ways to Avoid the 401(k) Early Withdrawal Penalty and Other Fees.]

Use retirement planning tools to help you plan financially

Retirement planning calculators it can help you determine if you will have enough money in retirement to cover expected expenses. With the 401 (k) calculator, you can figure out how much money you are likely to have when you retire given your current savings rate and expected return on investment. The Social Insurance Administration The pension appraiser can give you an estimate of your future Social Security benefit based on your personal earnings records.

Increase your social security benefit

One of the most consequential decisions about retirement is when you apply for social security. Payments are reduced if you apply before the full retirement age, which is 66 for most baby boomers and 67 for millennials, and increases the delay in starting payments to 70 each year. Married couples can coordinate their claims decisions to maximize their benefit par. Continuing to work or suspending your payments may also affect your pension payment. Keep in mind that your fee will adjust to keep up with inflation each year.

Sign up for Medicare on time

If you receive health insurance through work, it is important that you enroll in another health plan before retiring, usually through Medicare or the health insurance exchange in your state. Medicare coverage can begin the month you turn 65. It is important that you sign up for Medicare during the seven-month period around your 65th birthday, as there are penalties if you sign up later. Those who continue to work after age 65 should begin Medicare coverage within eight months of leaving work or a health plan to avoid penalties for late enrollment.

Make a plan of the estate

You can make life easier for your children and other heirs by creating a clear plan for your medical desires and finances. Make sure you have the will and pre-determine medical instructions and that user tags your pension and other savings accounts are up to date. The property plan ensures that all the property you leave is distributed to the right person.

More from American news

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New contribution limits 401 (k) for 2021

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Your guide to retirement planning originally appeared on usnews.com

Update 07/12/21: This story was published earlier and updated with new information.