Baton Rouge, Louisiana (BRPROUD) Financial planner Gregory Ricks encourages everyone to take control of their savings if they are out of control. He recommends running a budget audit to see how much money is coming in and how much is going out to see where the waste is. Ricks offers budgeting tools to help people get started. Mr. Ricks answered the following questions about his retirement:
How much should you save for retirement?
• According to the survey, the majority of savers say they need at least $3 million.
• A general rule of thumb is that you should save 10-15% of your pre-tax income for retirement.
• The exact amount you need will depend on your personal financial situation and your desired retirement lifestyle. If you want to know if you’re on the right path toward retirement, here are some savings milestones.
• When you turn 30, save an amount of your annual income.
• By age 40, you should have accumulated three times your annual income.
• My goal at age 60 is eight times my annual income.
• You should have 10 to 12 times your annual income in retirement savings by the time you retire.
How can I reach my retirement savings goals?
Leverage your 401(k)
• In 2023, individuals can contribute $22,500 to 401(k) plans. If your company offers matching, you and your employer can save a total of $66,000.
• Unfortunately, 17% of workers do not contribute to their employer-provided retirement account.
• Of those employees who contribute to 401(k) plans, 17.5 million miss a full match, leaving disposable cash on the table.
• We recommend donating 10-15% of all paychecks to a 401(k). If you can’t manage it, you should at least contribute enough to align with the company.
Open an IRA
• Consider opening an Individual Retirement Account (IRA) for additional income in retirement.
• There are two main types of IRA: Traditional or Roth.
• Contributions to a traditional IRA are tax deductible and your investment income will increase tax-free until you withdraw the funds at retirement.
• With a Roth IRA, your contributions are taxable up front and you can withdraw the funds tax-free when you retire.
Automate your contributions
• One of the most efficient ways to save for retirement is to automatically fund your 401(k) or other retirement account directly from your paycheck.
• This reduces the temptation to spend money instead of saving it.
• It’s also important to increase your savings over time. This can also be automated. Consider donating an additional 1-2% annually or semi-annually.
• A small increase in salary may not be noticeable, but it makes a big difference. If you want to work out the numbers, my his website gregoryricks.com has a retirement calculator.
• Do not withdraw from your account before you need your retirement money. If she leaves her 401(k) before she turns 59 1/2, the money will be taxed as regular income and subject to a 10% fine.
• There are some exceptions to early withdrawal penalties. If you are considering receiving money from your 401(k), we recommend that you consult with a financial professional.
Do you have any advice for people approaching retirement and realizing they don’t have enough savings?
Take advantage of catch-up contributions
• Retirement accounts are designed to help workers over the age of 50 by allowing additional catch-up contributions.
• In 2023, catch-up contributions will allow workers 50 and older to save up to $73,500 on their 401(k)s.
• If you’re seriously considering retirement, save as much as you can while you’re still getting paid.
ask for help
• No matter how old you are, our financial experts can help you create a retirement savings plan that meets your needs.
• This plan should evolve as you approach retirement and include everything from social security to tax planning strategies.