Planning for retirement shouldn’t be a stressful proposition – especially if you start early enough. By taking the time to identify ways you can save money now, reduce the amount of interest you will pay in the future, and identify the best places to invest your retirement savings, you will be able to rest easy knowing that everything is handled properly. Here are seven tips for building a fiscally sound future.
This retirement planning tool has grown in popularity throughout the country as companies stopped offering traditional defined-benefit pension plans. Check with your employer to see what plan is available through your workplace and check to see if the employer will “match” a set percentage of your contributions. Since 401k contributions are made on a pre-tax basis, this tool can be used to lower your tax burden for the current tax year – saving you even more money! There are limits on how much you may contribute, based on your age.
Roth IRAs, like the 401k plans, are tax-advantaged plans that can be used to grow your retirement nest egg. However, since the initial contributions are made with post-tax dollars, you can relax knowing that everything in the account is considered completely tax-free upon retirement. An interesting twist is that you are able, under certain conditions, to withdrawal the initial capital from Roth IRAs without incurring any tax penalties. To qualify, the Roth IRA must be open for at least five years, and the distribution must meet specific criteria. This plan is a favorite among many people who are self-employed or those with small business income, providing the potential for ample growth while not locking you out of your already-taxed money when you need it most.
One piece of advice that is true for savers of all ages – make your savings plan automatic. You should always pay yourself first, and the best way to consistently save is to automatically divert into your savings account a set amount of your paycheck.
Planning for College
Paying for a child’s college expenses can easily be among the most stressful endeavors that the average American family will experience. A 529 college savings plan is a popular option, and South Carolina currently offers two different 529 college savings plans. Both of these financial instruments offer a tax advantageous way to build a nest egg for covering tuition, books, and boarding for your young adult.
Pre-Paying for Vacation
It is tempting to put a vacation on a credit card and pay for all the expenses when you return from the vacation. However, when you make payments over a period of months, you incur a mind-boggling amount of interest. Prevent the extra interest expense by planning out your vacation a year or so in advance and sticking money back to pay for it. An added nicety of building a cash reserve is that it enables you to make reservations or buy plane tickets when they are at their lowest – making the long term savings even more beneficial to you and your family!
Save Money on Cars by Paying Cash
Those low monthly payments on car loans may make getting a new car appear affordable, though if you take the time to crunch the total amount you will be spending, it quickly becomes apparent that you are throwing thousands of dollars out the window. Car replacement should be a major savings goal. Every dollar you have available should be put down on the purchase of a car to limit the amount of the loan. This plan will provide you with significant savings throughout the typical five-year car loan. The savings for car replacement can even help in instances where your car suddenly breaks down or needs a new tire. Cash, stored in a moderately liquid account bearing a reasonable interest rate, can be used to keep you from having to get a loan or use a credit card.
Plan Gift-Buying to Save Money
The perfect gifts for those you care about most are, surprisingly enough, typically available throughout the year. We highly recommend that people budget a set amount for each item and save accordingly, making it possible to obtain the gifts when the price is at its lowest. After all – why should you risk paying a premium for something when it was on sale just a month earlier?
Visit Arthur State Bank Today
Arthur State Bank is your community-focused, family managed bank serving South Carolina. Stop by to see how we can help you make the right choices for today, tomorrow, and the years to come.