5 ways to get the most out of your retirement

Experts recommend contributing as much as you can at the beginning of the year.

Experts recommend contributing as much as you can at the beginning of the year.

Photo: Tima Miroshnichenko / Pexels

Getting the most out of your retirement contributions today will allow you to spend more in the future of your retirement or retire sooner if you choose.

According to a survey of Fidelity notes that 82% of Americans say their retirement plans have been negatively affected by the coronavirus pandemic and about a third say that it will take two or three years to get back to normal, due to factors such as loss of employment or withdrawal of retirement funds.

That is why it is important to consider these 5 tips to help you maximize your savings for your future.

Update your automatic contributions to payroll

Limits on employee contributions to 401 (k) plans and other similar employer-sponsored retirement plans increased to $ 20,500 by 2022.

Additionally, HSA limits were increased to $ 3,650 for singles and $ 7,300 for families.

In case you were already increasing your contributions to those accounts you can increase your payroll deductions in 2022 to save a little more.

An advantage, experts consider, is the effect of automatic savings. Since the money leaves your payroll before you can spend it.

Experts recommend that if you have not reached the maximum limit you should try to increase your savings.

A good savings goal would be to increase your payroll deduction percentage by one percentage point each year until you reach 10-20% of your salary.

Deposit your savings in advance

Note that The more time you have your money invested, the more money you will have for the long term.

You can maximize time by advancing your retirement savings by contributing up to 100% of your payroll to your 401 (k) plan.

Contributing as much as you can at the beginning of the year and reaching the maximum of your limit will allow you to obtain a higher balance in your 401 (k) retirement plan. However, remember that you may not receive all of your contribution through this method.

Another way is to pre-load your IRS account and deposit up to $ 6,000 at the beginning of the year.

You will need to make sure you earn at least $ 6,000 in income during 2022, but you don’t need to have earned that amount by December 31st.

Get the entire 401 (k) contribution

If you are not receiving the full contribution of your company to the 401 (k) plan, you are losing a significant part of your compensation.

Although a few percentage points of your salary may not sound like a big deal, the numbers add up over time.

If you are not sure what the benefits of your 401 (k) are, contact the human resources department and ask.

They will be able to adjust your automatic contributions to the minimum amount necessary to obtain the contribution. If you can, contribute even more than that.

Keep in mind the commissions

Fees can eat into your retirement savings. If you are primarily saving in a 401 (k) plan, you may be interested in knowing the fees associated with the account, including administrative and investment management fees, as well as investment fund expenses. If the commissions are substantial, you may consider contributing less to a 401 (k) plan and more to a retirement account with low or no commissions.

If you’ve left an old 401 (k) plan at your previous job, you may want to transfer the assets from that plan to an individual retirement account (IRA).

That could save you a lot of money in fees over the life of the investments.

Lastly, evaluate your current investments and alternative options. You may be paying high spending fees for a fund when you could achieve the same goal at a fraction of the price.

Consider a retirement plan for freelancers

If you have a side business that generates even a modest amount of income, you can open a retirement plan for freelancers. The two most popular options are a SEP IRA and an individual 401 (k) plan.

Even if you have a 401 (k) plan at your main job, you can still use an individual 401 (k) plan for the income you generate as a freelancer.

You could contribute up to a quarter of your net self-employment compensation to an individual 401 (k) plan or SEP IRA account, with very high contribution limits.

Additionally, you can contribute up to $ 20,500 to an individual 401 (k) plan as an employee, but that amount is reduced if you also contribute to a 401 (k) plan at another job.

If you want to maximize the amount you save with a tax advantage, a self-employed retirement plan can add additional savings capacity.

If you combine it with the previous tips, you will have an option that will allow you to achieve greater savings for your retirement.

To see how much you can contribute to a 401 (k) plan on your own, try this calculator.

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