As the summer cools down and we start to head into the fall, a lot of people ask me if there is anything that they can do to reduce their tax bill at the end of the year? Well there is one thing that most people with earned income can do and that is save for retirement. Saving for retirement is not only good because you are, well, saving for your future, but it also reduces your earned income.
Generally one of the easiest ways to save is through a company retirement plan. The money comes right out of your paycheck and a lot of companies offer some kind of match. The more money you put in the less your taxable income is for the tax year.
Below are a few tips to savings for retirement.
Take advantage of company match
Over the years, I have met many people who do not take advantage of a company match, the reason is generally “I can’t afford to save for retirement” but if you do not take advantage of the match you are leaving money on the table and will fall behind in your retirement savings. You should take full advantage of this benefit if it is offered.
Try to save 10% towards retirement
After speaking to a group of college students getting ready to graduate one question that came up was “how much should I save towards retirement?” A good rule of thumb is 10% that includes the employer match. For example, if your employer offers a 5% match that means you as the employee should put 5% of your income and the employer will match it and put in the other 5% for a total of 10% of your income.
Start savings now for retirement because the longer you wait the harder it will be to save what is needed to retire. If you start in your 20’s then you will gave to save less every year for retirement than if you start in your 40’s. Time is on your side if you start young.
It never hurts to start planning for your future and who knows, you could be able to retire early!