Ask Dana! Save More: A Financial Resolution on Autopilot By Dana R. Mascalo CFP® , RLP® , AAMS® , C(k)P®
Hi Dana: One of my financial resolutions is to save more, especially for retirement. How do I know where to save?
in motion. While many of our resolutions (think - diet or exercise) are sometimes difficult to stick to, a financial resolution like saving more can be set up for suc- cess quite easily. Saving more for retire- ment is a simple, yet powerful resolu- tion for most of us because it can have a positive impact for many years of our lives. Depending on your employment status, there are a variety of ways for you to save.
A The best part about this resolution?
Options to save offer the best way to save in my opinion – the AUTOMATION of contributions. You can set it up once and you will be scheduled to contribute all year long.
If You Are Employed If you have an Employer 401K, 403B,
or other savings plan, make it a point to start contributing to your plan if you haven’t already, or simply increase your employee deferrals for 2021. The limit this year for regular 401k or 403b contribu- tions is $19,500, and you can do an extra $6,500 if you are over age 50. Don’t forget
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new year brings a sense of clar- ity and the fresh opportunity to take action and set better habits
to consider and choose whether Roth or Pre-Tax contributions or combination of both would be attractive for your overall tax strategy. Be sure to see if your employer offers a company match and try to take advantage of the full match.
If you are already maxing out your
savings, ask if your plan offers other ways to save like after-tax contributions, deferred compensation plan, employee stock pur- chase programs, or other incentive plans.
If You Are Self-Employed
When you have your own business, options include IRAs, Simple IRAs, SEP IRAs, 401ks or Solo 401ks. The amount that you can contribute can range from $6000 for someone under 50 for an IRA or ROTH,
to up to $58,000 which is the limit for SEP IRAs, 401ks or Solo 401Ks. If you would like to set up a plan to fund for 2021, there is still time to open and fund an IRA or SEP IRA, should those end up being right for your business.
You’ll need to assess your income
level, type of business entity, number of employees (if any), desired contribution amount, and time of year in order to select which plan is best for you. A Financial Advisor or professional tax advisor can certainly assist you with this selection and can make the process easy.
If You Are Not Employed There are many individuals who still
would like to save for their retirement, but
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