Planning for retirement may seem overwhelming, but the sooner you get started, the better off you’ll be later since your savings will benefit from compounded interest over time. You should also take steps to safeguard your assets from high medical costs in the future.
Understand the Types of Retirement Plans
If your employer offers a 401(k) or 403(b) plan, take advantage of it, especially if the company provides a match. That’s essentially free money offered to encourage you to save for your future.
If your company doesn’t offer a retirement plan, you have other options, such as an individual retirement account (IRA). If you choose a traditional IRA, you won’t pay taxes on your contributions, but you will have to pay taxes when you withdraw money after you retire. With a Roth IRA, you’ll pay taxes now, not later. A financial planner can help you figure out which would be better for you based on your current income and tax bracket and your estimated future income.
Many people know that a health savings account (HSA) can help cover medical expenses for those with a high-deductible medical insurance plan. What’s less commonly known is that an HSA can also be used as a vehicle to save for retirement. Contributions are tax-deductible. If you leave the money in the account and invest it when you reach age 65, you will be able to use it tax-free for medical expenses, or you may choose to use it for other purposes, subject to taxation.
These types of plans have annual contribution limits. The limits are higher for older individuals to help them maximize their savings as they approach retirement.
If you’re self-employed, you may be able to save money through a solo 401(k) or a Simplified Employee Pension Plan. They have higher contribution limits than an employer-sponsored 401(k) or an IRA.
Think about Taxes
You may be able to claim a non-refundable tax credit though the Retirement Savings Credit. Eligibility is based on income, tax filing status, and retirement plan contributions.
Where you decide to retire can have a significant effect on your financial outlook. States have different laws on whether income, Social Security benefits, dividends, and interest are taxed. When thinking about where to live in your golden years, research tax laws and take them into consideration.
Plan for Long-Term Care
Even if you plan and save for retirement, those funds can disappear quickly if you require long-term care and you aren’t prepared. Nursing homes and assisted living facilities can cost thousands of dollars per month. Medicare and private insurance may cover just a small portion of those fees, and Medicaid only covers long-term care for individuals with few assets.
Petruzelo Insurance can help you compare affordable long-term care insurance policies that meet high standards and that could help you protect your nest egg. Contact us today to learn more about making long-term care insurance a piece of your retirement plan.