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This post is part of the “13 Money Resolutions for 2013” series. If you missed the earlier posts, you can check the first one for the complete list.
We’ve covered numerous small ways to save money in your budget for the new year, so by now, you should have more room to save and invest. One crucial area you should focus on is your retirement. While everyone’s retirement dreams and savings goals differ, the general idea is that you’ll need funds to cover your living costs until you’re 80 or 90 years old. Utilizing tax incentives and high-interest savings accounts can help you build a comfortable nest egg.
First, make sure to max out those retirement accounts! Keep in mind, I’m not a professional advisor, so it’s a good idea to consult one to ensure you’re maximizing your retirement savings.
Take full advantage of your company match. Who can say no to free money? Whatever match your company offers for your retirement account, make sure you use it. Most company matches are before taxes. For instance, if you pay 25% in taxes and contribute $100 gross to your retirement account with a $100 company match, your paycheck will only reduce by $75, but your retirement account grows by $200. Isn’t that great?
Max out your retirement account. These accounts might have different names in various countries, but the principle is the same. They’re generally tax-free, so ensure you deposit the maximum amount each year. To make it easier, set up automatic transfers every payday. It’s much simpler than trying to remember at the end of the month, plus you won’t miss the money this way.
Max out your tax-free savings account. In the UK, these are called ISAs. You’re entitled to £11,280 in stocks and shares, or a mix of £5,760 in cash and the rest in stocks and shares, with all your money and capital gains tax-free. If you withdraw money, you can’t put it back, so try to leave it and max it out every tax year.
Max out your college funds if you have kids. Ensure you contribute the maximum amount to their college funds. Some states offer matches, while others provide tax incentives. Regardless, there is likely a benefit you can take advantage of.
Max out all possible accounts! Other accounts to consider include Health Savings Accounts (HSAs), although you must spend the money on healthcare or risk losing it, which makes it a bit more complex. Additionally, there are savings accounts with bonus rates and incentives for low-income earners, like Individual Development Accounts (IDAs) in the US. While these matches are small, targeting people who aren’t used to saving, if you qualify, make sure to benefit from the free match!
What other accounts should savers max out in 2013?