As a father, you probably feel a sense of responsibility to provide for your family, both financially and otherwise. While it’s important to take care of your family, it’s equally important to save money for your retirement.
Maximize Your Retirement Savings
After all, you want to have enough money to retire, so you can spend quality time with your children and grandchildren. Here are some tips you can use to maximize your retirement savings and enjoy your later years as a dad or grandpa.
401(k)
If your employer offers a 401(k) plan or a similar retirement plan, like a 403(b), take advantage of it. Many employers offer a company match, which means the company will match the contributions you make up to a specific amount. For example, say your company matches 50% of employee contributions up to 5% of their salary. If you make $75,000 per year and contribute $3,750 to your 401(k), your employer will contribute $1,875. If you contribute nothing, you’re leaving that free money on the table. Don’t make that mistake.
Even if your employer doesn’t offer a match, it’s still worth contributing to a 401(k). Usually, you make pre-tax contributions to a 401(k), and those savings grow tax-deferred. You can also have your contributions deducted automatically from your paycheck, making this option an easy, convenient way to start saving for retirement.
IRA
Besides a 401(k), you can also contribute to an individual retirement account (IRA), which is separate from an employer’s plan. You can choose to open a traditional IRA or a Roth IRA. With a traditional IRA, the contributions you make may be tax deductible. Those investments grow tax-deferred until you withdraw them during retirement. With a Roth IRA, your contributions are not deductible, but your distributions may be tax free if you meet certain criteria.
Both traditional and Roth IRAs have limits on how much you can contribute each year. For 2023, it’s $6,500 per year. If you’re over 50, you can also make $1,000 in catch-up contributions each year, increasing the total amount you can contribute to $7,500. You may also be subject to income limitations for a Roth IRA if you earn over a certain amount each year.
Health Savings Account
There are also alternative accounts you can use to save for retirement. A health savings account (HSA) allows you to put money away for your medical care. If you have an HSA-eligible health plan, you can make contributions to both invested money for long-term savings and cash to pay for your medical care.
If possible, contribute as much as you can to an HSA. In 2023, you can contribute up to $3,850 for an individual and $7,750 for a family. If you’re over 55, you can contribute an additional $1,000 each year. Those contributions are tax deductible, and you can also make tax-free withdrawals for qualified medical expenses.
Annuity
An annuity can be a great way to ensure you receive steady income throughout your retirement. When you purchase an annuity, you pay premiums to an insurance company, which invests that money into an annuity fund. When you reach retirement, you start to receive payments from the annuity fund.
While there are different types of annuities, a fixed annuity ensures you receive a minimum rate of return as the annuity fund grows. It also guarantees you’ll receive payments per the contract terms, either for a set number of years or throughout the rest of your lifetime. Annuities can be customizable, so use resources to determine the right one for you. You can also speak with a financial adviser to learn more about an annuity and whether it’s a good savings option for your retirement plan.
Delayed Social Security Benefits
You can start to receive Social Security benefits at age 62, but delaying those payments can have advantages. If you start taking the benefits before you reach full retirement age, which is 67, you’ll receive a reduced amount. However, if you delay Social Security benefits after you turn 67, you can increase the monthly benefits you receive. These benefits will increase based on your age until you turn 70. If you can, even waiting a year or two to retire can substantially increase your Social Security benefits. It can also increase survivor benefits for your wife or partner.
If you’re close to retirement (or even if you’re not), it’s time to start saving for the next chapter of your life. With these tips, you can maximize your retirement savings, whether you contribute to a conventional 401(k) and IRA or you choose an alternative method, like an annuity or health savings account. However you save for retirement, having this money as you get older can allow you to live comfortably and enjoy your golden years with your family.