New Year, New Retirement Savings Strategy
Published on January 21, 2015
Many people make New Year’s resolutions that seem practical. This is the year I will (fill in the blank):
- Lose weight
- Save more
- Get organized
- Exercise more
One resolution that you should put at the top of your list is saving for your retirement.
Like any New Year’s resolution, it is all about starting early. According to Alicia Munnell, director of the Center for Retirement Research at Boston College and co-author of “Falling Short: The Coming Retirement Crisis and What to Do About It,” the golden age of retirement is over. Munnell and her co-authors assert that retirement security in the 21st century is challenged by increasing life expectancy and high health care costs. Therefore, Americans must adjust their practices and expectations.
Make Your Resolution Stick
Here are some easy ways you can stick to your resolution and ensure that your golden years are truly golden:
- Save one percent more or, better yet, put any “windfall” such as year-end bonuses, raises, or tax refunds directly into your retirement savings.
- Find painless ways to reduce expenses and divert those monies to retirement savings.
- Take advantage of employer matching contributions. Make sure you save enough to qualify for your company match. Read the fine print on your company’s vesting program so you understand what portion you get to take with you if you leave the company.
- Consider whether to claim retirement saving tax breaks. For instance, you can defer paying up to $18,000 that you have contributed to a 401(k) or $5,500 in an individual retirement account in 2015. If you are 50+, these limits jump to $24,000 in a 401(k) and $6,500 in an IRA.
- Alternatively, you can contribute the same amounts to a Roth 401(k) or Roth IRA and prepay the tax at your current rate, and then withdraw the money tax-free in retirement. Some low/moderate income households may qualify to claim the saver’s credit on their 401(k) and IRA contributions.
- Consider alternative investment options in a self-directed IRA. The ability to self-direct retirement savings with nontraditional investments (such as real estate, mortgages, unsecured loans, private hedge funds, precious metals, limited partnerships, commercial paper and more) can help make that New Year’s resolution grow a whole lot quicker for those in the know.
Freedom of Choice
Investors who want to have a stable and secure retirement know that a self-directed IRA can be a great way to build retirement wealth more aggressively. With a self-directed retirement plan, informed investors have the ability to develop a diversified portfolio that they control, with both traditional and nontraditional assets they know and understand. If you are already investing in these alternative assets outside of your existing retirement plan, why not resolve to build a potentially more lucrative nest egg through self-direction? It’s easy to get started with a call to Next Generation Trust Services.
As a self-directed IRA administrator, we handle all the details of the transactions and manage all the paperwork and filing. Our professionals are available to answer questions about self-directed retirement plans and our transaction specialists ensure you are investing within IRS guidelines.