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If you have not even started planning out your retirement, all of it may seem impossible to you right now. In New York, where the cost of living is higher than in many other states. Therefore, figuring out how to save enough is important. The key is to start early and consistently contribute to retirement funds.
Reports from the New York State Teachers’ Retirement System tell about the growing challenges for public retirement funds, including economic fluctuations and rising living expenses. Experts recommend saving 70% to 90% of your current income to maintain your standard of living once you stop working.
Getting started does not have to be as complicated as you think. With some quality professional guidance from an accountant in Clifton Park and Albany, you will be right on track. They can show you what your options are and what would work best for you.
Understand your retirement needs
If you are saving for retirement, you first need to know how much money you will need to live comfortably. Imagine the life you wish to live, including travel plans, daily expenses, and so on.
You will also need to think about your healthcare costs because medical expenses rise as you age. Moreover, inflation is also a factor. The prices of goods and services may increase with time; therefore, you will need to save more money in order to live a healthy lifestyle.
You should start by eliminating your retirement expenses. For this, you can use online calculators to know how much money you will need based on your current spending patterns and other factors like inflation.
These online calculators might ask you for details such as at what age you are planning to retire, your current savings, and your pension. After making an estimate, you should decide where to save.
You can open an individual retirement account (IRA) or contribute to a 401(k) if your employer offers you one. These accounts will also save you from taxes and help you save money faster.
Therefore, you must not delay and start saving as early as possible. Make a monthly savings plan. Even if you save a small sum monthly, it can add up over time
Types of retirement accounts
1. Employer-sponsored plans.
You can save a good amount of money with your employer-sponsored retirement plan, such as 401(k) and 403(b). The 401(k) is the most popular plan and is offered by a private employer. However, 403(b) is made for public employees and other organizations.
Pensions are less common nowadays. However, they provide a fixed monthly salary even after your retirement. It is usually based on your years of service and salary. A big advantage of 401(k) and 403(b) plans is the employer match.
Your employer will contribute a certain amount of money to your retirement savings. This free money can help your savings grow faster.
2. Individual retirement accounts (IRAs).
You can also save for your retirement through Individual Retirement Savings (IRAs). There are two main types of IRAs: Traditional IRA and Roth IRA. A traditional IRA is a retirement account where you can put money before paying taxes on it. However, you will need to pay the tax when you withdraw the money in retirement.
In a Roth IRA, you put your money after paying your taxes. This money will grow tax-free, and when you take it out in retirement, you will not have to pay taxes on it.
Both of these IRAs have contribution limits and age requirements. It is a good option to save for your retirement if you do not have any employer-sponsored plans.
Start saving for retirement today!
If you have not yet started saving for your retirement, an accountant can help you begin by giving financial advice. Consult with one today!