Save Early, Save Often, Start Now
Saving for retirement is one of the most critical financial decisions you’ll make in your lifetime. While it may seem distant – especially when you’re young or just starting your career – the earlier you start saving, the more secure your financial future will be.
Four Reasons To Start Saving For Retirement:
- Longevity and Uncertainty – People are living longer than ever before, thanks to advancements in healthcare. While this is great news, it also means that your retirement savings need to last longer.
- Rising Costs of Living – The cost of living continues to rise, including healthcare, housing, and basic necessities. Without sufficient retirement savings, you may struggle to keep up with these costs, potentially forcing you to rely on family members or government assistance.
- Inflation – By saving early and regularly, you can build a nest egg that outpaces inflation, ensuring you maintain your lifestyle during retirement.
- Social Security Isn’t Enough – According to the Social Security Administration, Social Security benefits replace only about 40% of the average worker’s pre-retirement income. This means you’ll need additional savings to fill the gap.
When To Start Saving For Retirement:
- In Your 20s – With decades ahead of you, even small contributions can grow substantially. For example, if you start saving $200 a month at age 25, assuming a 7% annual return, you could have over $500,000 by age 65.
- In Your 30s – You still have time on your side, but you may need to increase your contributions to catch up.
- In Your 40s – You might have other financial responsibilities like a mortgage or college savings for your children, but it’s important not to neglect your retirement fund.
- In Your 50s and Beyond – Focus on maximizing your contributions, taking advantage of catch-up contributions allowed for those 50 and older, and adjusting your retirement expectations if necessary.
Roth IRA vs. Traditional IRA
When it comes to saving for retirement, Individual Retirement Accounts (IRAs) are popular options, with Roth IRAs and Traditional IRAs being the most common. Here’s how they differ:
- Traditional IRA – Contributions to a Traditional IRA are typically tax-deductible, meaning they reduce your taxable income in the year you contribute. However, withdrawals during retirement are taxed as ordinary income. This option is ideal if you expect to be in a lower tax bracket in retirement.
- Roth IRA – Contributions to a Roth IRA are made with after-tax dollars, meaning you don’t get a tax break upfront. However, the significant advantage is that withdrawals during retirement are tax-free, provided you’ve held the account for at least five years and are over 59½. A Roth IRA could be a better choice if you anticipate being in a higher tax bracket in retirement or if you value tax-free income during your later years.
Whatever your retirement savings goals may be, Community Bank is always here to lend a hand. Just reach out or stop by your local branch, we’d love to talk more about what successful saving looks like for you and your family.
Start Saving