subject: Retirement Account Contributions And Other Retirement Income Planning Tips For 2011 [print this page] Better retirement income planning starts with rethinking your budget and cutting down on your monthly expenses, after which you can place your surplus cash into other investments or increase your retirement account contributions for substantially-increased distributions in the future. Many older workers already have Individual Retirement Accounts, 401Ks, or other workplace savings plans, but still need to use these better to obtain maximum benefits.
Maximizing 401K Contributions and Using Tax Advantages
The responsibility of saving enough for retirement and supporting yourself in your golden years has become more important in light of current economic conditions and the possible degradation of the US pension system. What you should now is increase your retirement plan contributions to your 401K, which can be advantageous as they lower your present taxable income while growing immediately without the incremental drag of taxes up to the point that you withdraw them in retirement. Your regular 401K contributions, ones made every payday, generate free money in the form of matching employer contributions, no matter the rate. Contribute enough of your salary regularly to get the maximum employer match.
If you work with an employer that facilitates a Roth 401K, contributions are made after taxes, with retirement withdrawals being tax free. Depending on your financial circumstances, such as the possibility of lower or higher tax bracketing in retirement, you can choose between a Roth 401K or a regular 401K to retain more of your nest egg at withdrawal.
IRA Contributions
You may be qualified to contribute to an IRA or Individual Retirement Account. This type of retirement savings vehicle allows participants under 50 to contribute up to a limit of $5,000 per year, while employees above 50 years of age may contribute up to a maximum of $6,000 because of a feature allowing these older workers to catch up on their contributions.
IRAs may be opened with credit unions, banks, brokerage firms, or mutual fund providers, with you having a hand in how the contributions are invested. These types of retirement accounts may be good ways to add to how your employer-sponsored retirement plan allocates assets and earns from them, especially if these latter plans limit your investment options and possibly lower how effective your retirement income planning is.
IRAs can give you access to investments other than those in the roster of your workplace retirement savings plan, including commodities, CDs or Certificates of Deposit, and stocks. The extra investment options can result in a portfolio that is better diversified; one that is more beneficial to your overall retirement income planning strategy.
