Experts predict that retirees need from 80 to 100 percent of their pre-retirement income to maintain their lifestyle after retirement. Yet, surveys show that most Americans remain unprepared for retirement. Social Security benefits will also provide a source of income upon reaching retirement age.
But, that won’t be enough. You will need to add your own retirement savings to live comfortably during your retirement years.
Ways to Save
Here are a few simple steps you can take today so you will be prepared when it’s time to retire:
Increase contributions to your NC 401(k) or NC 457 Plans, or NC 403(b) Program. Saving $5 per day, or $35 per week, in your 457 deferred compensation plan for 30 years, you can save $54,000 without interest. If you earn an average rate of return of five percent, you will have more than $120,000 in your account. That shows the power of retirement savings!
If you’re starting a little later than everyone else, don’t be discouraged. You can still save more than $119,000, by setting aside $10 a day, or $300 a month, in your retirement savings account for 20 years. This assumes a five percent annual rate of return.
Saver’s Credit. Sometimes saving seems really hard, especially if your income is limited. You may be able to take a tax credit of up to $2,000 ($4,000 if married, filing jointly) for making contributions to an IRA or employer-sponsored retirement plan. If you are eligible, the amount of your credit could result in an increased tax refund when you file your taxes.
Open a personal savings account with a bank or credit union. While the interest earned may be lower than your NC 401(k), NC 457, NC 403(b) or other supplemental retirement income investments, your local financial institution can provide an easy and convenient way to set money aside for emergencies and to establish credit.
Take advantage of tax savings programs like the Cafeteria Plan (also known as a Flexible Spending Account). Using pre-tax dollars to pay for qualifying medical expenses can save you as much as 40%.