Financial security in your retirement doesn’t just happen. Committing right now to securing your future retirement plans is the best option for anyone; however, if you are in your 50’s or above, it becomes even more important.
Here are some of the facts:
- The average American spends 20 years in retirement after retiring
- Less than half of the people living in America have calculated how much they need for retirement
- Almost 30% of private industry workers did not participate in a defined contribution plan (such as a 401k) even though they had access to it
You need to start saving, know your needs, keep saving, contribute to your employer’s retirement savings plan, and consider some basic investment principles. Here are four ways to start planning for your retirement right now:
1. Contribute to Your 401(K)
If you’re looking to grow your capital, tax-free, consider adding to your 401(k) each year. The contribution limits, as of 2018, are $18,000 for those under age 50, and $24,000 for those over 50. There may be some limitations on how funds are invested due to administrator and employer policies, but that is not a reason to totally ignore this avenue of investment. Check out the policy to see how much your employer will match your contributions, as funds matched by your employer are also tax-free. Consider investing in your 401(k) now if you want tax-free growth.
2. Real Estate
People don’t pay taxes on appreciated real estate until it sells, and even then, you may be exempt from a large percentage of the tax once the property does sell. Real estate is a safe and effective way to diversify, as the gain from the sale of your home can be subtracted from the sale of your home as long as you’ve lived in it for two out of the five years prior to sale. If you’re single, $250,000 can be excluded. If you’re married and are both paying taxes, exclude $500,000. Primary residences cannot exclude the gain but can be deferred until the actual sale.
3. Health Savings Account (HSA)
Generally speaking, an HSA is used for health-related problems. If you don’t ever get sick or require medical attention, padding your HSA is a great idea, as it can be used towards your retirement if you do not need medical attention. If your employer contributes to your HSA, this is also considered tax-free, as they are not classified as income. This money will continue to grow and will not be touched by federal taxes. An HSA is also transferable.
4. Consider Whole Life Insurance
Term life insurance policies are more popular because they’re cheaper and more well-known. If you can afford a whole life insurance plan, consider opting for this type of insurance. With term, you pay for a fixed period of time and a fixed amount every month. If you survive the period, you owe the cost of premiums. If you die during the period, your beneficiaries receive the compensation.
Whole life policies are fantastic because you can borrow against the policy, cash in on the policy, and its value builds exponentially in the account without taxation. Starting a whole life insurance policy while you’re young can create quite the luxurious lifestyle in your retirement.
Benistar: A Leader in Group Retiree Medical Benefits
We work with brokers and consultants to provide retiree medical and prescription drug solutions for companies and organizations such as labor unions, city, and county government entities, educational organizations, religious organizations, and publicly and privately-held companies. We provide retiree health and retirement plans for more than 1,300 plan sponsors throughout the U.S. and administer more than $200 million in premiums annually.