Easy Ways to Save Money for Retirement

Saving money for retirement often feels like an impossible task to many, especially when it seems like so many live from paycheck to paycheck. Nonetheless, saving for retirement is possible, and chances are good that you will not even miss the little bit of money coming out of your paycheck.

#1 – Sign Up for a 401k Account

A 401k account is by far one of the best and easiest ways to put money away for your retirement. If your employer offers it, all you have to do is fill out a form and determine how much money you would like to deduct from your paycheck each week. You can choose a flat dollar amount or a percentage of your earnings, and the best part is that your employer will often match your contribution up to a certain amount of money or percentage. For example, you may opt to contribute 6% of your earnings each week, but your employer may only match you up to 5%. Either way, it adds up over time and provides you with an excellent way to save.

#2 – Open an IRA (Individual Retirement Account)

Although you can always just open a savings account and start making deposits, IRAs are better than traditional savings accounts in a number of ways. If you are not yet 50 years of age, you can contribute up to $5,500 into your IRA; those over age 50 can contribute more. IRAs give you tax advantages that traditional savings accounts do not, so you will need to be sure that you understand the differences between traditional and Roth IRAs since each one comes with a different tax treatment for your contributions and withdrawals.

#3 – Keep an Eye on Your Social Security Benefits

One of the biggest mistakes you can make involves assuming that your Social Security benefits will cover all of your post-retirement needs. The average American only brings in between $12,000 and $15,000 per year via Social Security after they retire, and that is well below the poverty line. Although Social Security is a great starting place, it will not allow you to retire comfortable if you do not supplement it. The Social Security Administration’s website can help you determine your estimated benefits at various ages with its retirement estimator tool.

#4 – Never Touch Your Retirement Savings

While IRAs and 401k accounts provide an excellent way to earn interest on the money you contribute over time, you might feel tempted to take a little money here and there to help you cover emergency expenses. Don’t. Withdrawing early from an IRA or 401k account has some pretty steep penalties, and in some cases, you may even get hit twice – once when you withdraw, and again come tax season. Save money in a traditional savings account to cover emergency expenses. Most experts recommend keeping an amount equal to at least three months’ of your household’s income in savings.

Saving money for retirement does not have to be a difficult or painful task. In fact, in most cases, you can have your contributions withdrawn from your paycheck before they are taxed. For now, you might not even know it is missing – but in 35 years, it adds up and provides you with a comfortable nest egg.

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How to Start Prepping for Your 2016 Taxes Now

If tax time always seems to stress you out with its piles of paperwork, endless streams of receipts, and new laws regarding healthcare, you are not alone. According to information from the IRS, there are a few things you can do now to make the 2016 tax season a smoother one.

#1 – Report Major Life Events to Your Employer

Each time you start a new job, your employer asks you to fill out a form called a W-4. On the W-4, you list yourself and any other dependents you have so that your employer knows how much to deduct from your paycheck for various income taxes. If you have gotten married or divorced, or if you have had a new baby or had a child move off to college, making these changes now can save you some time come tax season. In fact, the IRS says that you should change your W-4 as soon as possible after these events in order to minimize your potential tax liabilities.

#2 – Keep Information Up to Date in the Health Insurance Marketplace

When you purchase and pay for your health insurance through the Marketplace, part of those payments may be subsidized in order to make your coverage more affordable. The amount of subsidy you receive is determined by your income and the number of dependents you have. What’s more, if you fail to report any changes in income, you may actually end up repaying the government for subsidy overpayment in 2016. Be sure to keep your Marketplace information up to date at all times.

#3 – Find a Qualified Preparer (and Make an Appointment)

Procrastinating will not make tax season go away, unfortunately, but finding a qualified preparer can certainly make things simpler for you. Many preparers guarantee their work and will help you through an audit, if necessary. Some promise to reimburse you for anything you end up paying to the IRS due to a mistake on their part, and a few will review your tax returns from previous years to look for mistakes that could net you a little extra on your next refund. Make sure that your preparer offers you audit assistance and a guarantee at the very least, and schedule your appointment as soon as you have your W-2s in hand.

#4 – Know When to Itemize Your Deductions

Deciding to stick to standardized deductions on your tax refund offers simplicity, for sure. However, contrary to popular belief, standardizing your deductions does not grant you immunity to audits, and itemizing your deductions is not a red flag for the IRS to pull your return for audit. It is almost always best to itemize if you run a business, and itemizing can also save you some money if you’ve purchased a house or even had a baby during 2015.

Tax season does not have to be dreadful in 2016. With a little preparation and the right tax professional, things will flow smoothly and your mountain of paperwork will soon be behind you.

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What Retirement Planning Looks Like in 2015

Retirement Tips

Do you have enough money for retirement? This is an important question, and one that you should be asking yourself in 2015. There are plenty of ways to save money and plan for your retirement, but it is up to you to choose the method that works best for your needs.

IRAs

IRAs, or Individual Retirement Accounts, are by far one of the most popular tools for retirement planning. These are tax advantaged long-term savings accounts that you contribute to over time. Because you agree that you will not withdraw the money for a specific period of time, you get a tax deduction up to a certain income thresh hold. The good part is that your money grows tax-deferred or in some cases tax free which gives you an opportunity to reduce taxes significantly over the long term therefore increasing the potential to put more money in your pocket at retirement.

401k Accounts

For many people, 401k accounts are integral parts of their retirement plans. With a 401k, you choose a percentage of your paycheck to contribute and your employer matches your contribution up to a certain percent and amount. You do not pay taxes on the money that you put into the plan therefore reducing your annual tax bill.  If you switch jobs for any reason, you can take your account with you as long as you are vested in company contributions. Remember that not all employers offer 401k benefits, and remember that withdrawing your savings prior to your retirement date comes with some fairly steep penalties.

Real Estate

The housing market fluctuates over time, and while buying houses to remodel and resale was a great way to turn a profit a decade or so ago, things are different in 2015. Today, it is harder to sell homes since people with fair and even good credit are having more difficulty obtaining mortgage loans. Although real estate is still a solid investment for the long-term, it should not provide your nest egg. If most of your retirement money is tied up in properties, it is a good idea to diversify.

Business Investments

Business investments are always a great option for those who have a keen eye for success. However, bear in mind that if you invest in a seemingly great business idea and that company goes bankrupt, you have more than likely lost the money you invested. In 2015, business investing provides a great opportunity to diversify as long as you make sure to keep the majority of your retirement money in IRAs and 401k accounts.

Wall Street

People have used Wall Street as a way to save for retirement for decades. Buying, selling, and trading stocks on the market – if you are well-versed in the practice – is not only a fantastic way to diversify your retirement portfolio, but it also provides ample opportunity to multiply your investments. Like business investing and real estate, however, the stock market is never certain. If you choose to utilize Wall Street as a method of retirement planning, be sure that you hire a knowledgeable Financial Planner or Advisor.

All of these options are popular among those who are planning for retirement. In 2015, most people are more concerned with the stability of their money than its exponential growth, so they choose IRAs and 401k accounts over riskier practices.

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