What are your goals for the future? If retirement planning is top of mind, you’re not alone.
According to new research from Empower and Personal Capital, 36% of Americans are making retirement planning a priority this year. That’s more than those who said losing weight (28%), buying a house (14%) or getting a new job (11%).
Whether you’re just getting started or looking to kick it up a notch, here are some of the best ways to save for retirement in 2022 and beyond:
1. Understand your complete financial picture.
It’s important to look at your finances from where you are in the present and where you want to be in the future. Make sure you’re in a good spot now, so you can stay on track to accomplish future financial goals.
One simple way to start is understanding where your money is going and any barriers that are holding you back from meeting your goals. Utilize online tools that can help provide a holistic snapshot of your financial life and commit to making changes where necessary. For example, determine areas you can decrease spending and put more money toward saving.
2. Maximize retirement savings plan perks.
Don’t leave “free” money on the table. If you have an employer-sponsored 401(k) plan (or 403b, 457 or other), enroll and meet your match. This is the money your employer provides to match what you set aside for retirement, so you can save more than if you did it individually.
Additionally, check out the IRS 401(k) limits and consider maxing out your contribution. For 2022, the IRS allows individual contributions of $20,500 per person and $27,000 (including catch-up contributions) for people age 50 and older. If that’s not possible, consider increasing your contribution a bit every year.
Remember to explore all options of your employer’s retirement plan to create a savings approach that is right for you. For example, some employers offer a Roth 401(k), which is funded with taxed dollars. There are no income limits on a Roth 401(k) and withdrawals are tax-free at age 59½ as long as your initial account contribution was made five or more years prior to the withdrawal.
3. Contribute to an IRA.
IRAs are another retirement tool to consider directing savings into. IRAs are great options for self-employed workers, small businesses, teens with their first job and those who are maxing out their employer retirement plan. Even if a spouse isn’t working, they may be eligible to fund a spousal IRA. Remember, you can save in both a 401(k) and an IRA.
Which type of IRA is right for you? A traditional IRA gets a tax break upfront because it is funded with pretax dollars and a Roth IRA is funded with post-tax dollars, so you can pull that money out in retirement and not have to pay additional taxes on the contributions and earnings. If flexibility is important, a Roth IRA might be a good choice because you can withdraw your contributions without penalties at any time if needed.
4. Contribute to a Health Savings Account.
Health savings accounts (HSAs) are a convenient way to set aside money for expenses related to your health, but they are also a smart financial tool. HSA contributions reduce your taxable income so you benefit come tax time. HSA earnings growth and qualified withdrawals are also tax free, rounding out HSAs’ triple tax advantage. In 2022, an individual with coverage under a qualifying high-deductible health plan can contribute up to $3,650, according to the IRS.
What’s more, there’s also no “use it or lose it” requirement, and many programs allow you to invest your HSA money once you hit a certain threshold. This means it’s a great way to save for health expenses now as well as during retirement.
5. Get help from a pro.
Financial planning can be confusing and complex, so don’t be afraid to ask for help. A financial advisor can help you determine exactly what your financial goals are, walk you through your options, and provide a personalized plan. Getting trustworthy advice can have a big impact on how confident you feel about your prospects going forward.
No matter what stage of life you’re in, it’s never too early to start saving for retirement. There are plenty of paths you can take, and the earlier you start, the better off you’ll be.
