Everyone looks forward to retirement but one of the biggest problems that many people face when the time comes to retire is that they do not have enough saved to fully retire. There are a number of things you have to keep in mind as you plan for retirement regardless of how near or far it is in your future. One of the best ways to maximize your retirement savings is to reduce how much you pay in taxes, but most of us have no idea how to go about doing that. Here are three keys to helping make the most out of your retirement funds:
- If you have the option of getting a 401K, do it.
Earnings can be added before taxes, which mean you can maximize how much you save. This money will not be subject to taxes until you are ready to pull it out. It also reduces the taxes on your net income, meaning you will have a little more money for bills and paying down debt month to month. One thing to keep in mind is that you can withdraw money from these accounts but if it is before retirement age you will be limited to how much you can take out and you will most likely have to pay a penalty tax on it.
- An IRA is an acceptable alternative to the 401K
Like 401Ks, your money will be subject to fewer taxes; unlike a 401K, there is a limit to how much you can add. There are a number of different regulations and conditions associated with IRAs, so if you are interested in opening one, you need to do some research into what will work best for your situation.
- You can also save the old fashioned way
Families and single filers with less income receive greater tax credits. Depending on your income and filing status, you may be eligible for tax credits for your savings. Put a little aside every month, even fifty dollars a month will make a huge difference when you pull that lump sum out at the age of 65.