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Step 10 of 12: Financial Wellness Plan for Retirement

Step 10 of 12: Financial Wellness Plan for Retirement

Savings  |  Budgeting  |  Retirement  |  Financial Wellness  |  Finances

It’s never too early – or too late – to start planning for your retirement. However, the more time you allow for your savings to grow, the bigger the nest egg you’ll have when it’s time to cash in. 

Here’s how to get started on planning your retirement.

Set a target number

First, determine how much you’ll need to have saved for living comfortably and independently throughout your retirement. Experts advise taking your current living expenses and multiplying the number by 400 to identify the amount you’ll need to sustain yourself based on a 4% return.

Choose your retirement account strategy

Next, you’ll need to select a place to keep your retirement savings. There are many options to consider, some of which you may already have if you are, or have been, employed. Here’s a quick review of the two most common retirement accounts:

  1. 401(k)

If you’re employed, you likely have a 401(k) that’s working toward collecting money for your retirement. Take advantage of this retirement tool by maximizing your contributions. Also, many employers match a portion of (or all) contributions you make, which is basically free money, to help your retirement savings grow, tax-deferred.

  1. IRA

There are two popular kinds of Individual Retirement Plans (IRA): conventional IRAs and Roth IRAs. A conventional IRA will let your money grow, tax-deferred, but withdrawals are taxable. A Roth IRA does not feature tax-deferred growth, but qualified withdrawals are not taxed. Like a 401(k), some employers match a portion of (or all) contributions. But, there are federal limits on how much money you are allowed to add to your IRA each year. 

The table below shows a brief summary of the pros and cons of each retirement vehicle for easy comparison.                                 

Features 401(k) IRA Roth IRA
Matching Funds Yes No No
Tax-Deductible Yes Depends on income, tax-filing status and other factors No
Tax-Deferred Growth Yes Yes No
Taxable Withdrawals Yes Yes No
Maximum Yearly Contribution (2022) $20,500 $6,000  $6,000
Maximum Yearly Contribution Age 50+ (2022) $27,000 $7,000 $7,000

 

After you’ve selected your retirement fund, you’ll also need to choose somewhere to invest. With a bit of work, and a lot of planning, you’ll have your future secured in the best way possible.

Your Turn: What’s your retirement vehicle of choice? Share it with us in the comments!

About Mutual Security Credit Union

MSCU is a Credit Union in Connecticut, open to everyone who lives, works, worships, or attends school in Fairfield, Litchfield, and New Haven County.