Take full advantage of contributions for a more comfortable retirement
Limits for retirement savings plans were raised for the 2015 tax year. Boosting your retirement contributions means having more money to spend in your golden years—and more to leave behind for those you love. Here’s what you need to know:
Max out your workplace plan. The new limit for 401(k)s and 403(b)s was raised to $18,000 for this tax year. That means you can put away $1,500 a month all year long. If you’re 50 or older, you can catch up and contribute $24,000 a year—or $2,000 a month—instead. Even if you can’t afford to contribute the max, make sure you take advantage of the free money offered by your employer’s contribution.
Consider an IRA. If you’re maxed out on your work plan and have more money to save, opening a traditional IRA means you can sock away $5,500 more pre-tax dollars this year. After that, you can contribute the same amount—in after-tax dollars—to a Roth IRA if you earn less than $183,000 a year if you’re married and filing jointly, or $116,000 if you’re single, and a Roth earns tax-free interest! (The amount is reduced for those earning greater income and phases out completely at $193,000 and $131,000, respectively.)
Check fees. Investment fees can really eat into your returns and erode your savings. According to some estimates, a 1 percent difference in fees can cost you tens of thousands of dollars over the life of your retirement account. Comparing investments early on and choosing those with lower fees will protect your bottom line.
Rebalance. Over time the asset allocation you initially chose gets skewed due to gains and losses in the market. When you rebalance, you bring your assets back into alignment with the original allocation you chose. This helps protect you against losses because you remain diversified.
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