Health & Fitness
#11 of "21 Critical Retirement Questions Answered" one at a time by Gene Offredi CFP© RFC
"I've heard there are a set of basic retirement savings rules. What are they?"
Retirement Saving Strategies And Rules
Q #13: “I’ve heard there are a set of basic retirement savings rules. What are they?”
The rules sound simple, and they are, but many people fail to follow them. Everyone has a slightly different list but here are what I think are four important basic retirement savings rules:
Rule #1: Set a contribution goal
Most people should save 15% of their gross income for retirement every year.
Rule #2: Choose Roth over traditional
While your contributions to a traditional IRA are tax-exempt, you will pay taxes on the money you withdraw when you retire. With a Roth account you pay upfront but the money you withdraw during retirement when you income is lower will be tax-exempt. You’ll pay less in taxes with the Roth.
Rule #3: Save automatically
If you allow your employer or your investment company to make monthly automatic deductions it’s easier to keep your contributions regularly. You don’t miss money you never see.
Rule #4: Keep your retirement money in investments
Keep contributing to your retirement whether the market is up or down. The stock market will have periods where it drops, but overall it recovers and continues to grow. Your investments will recover and continue to grow as well. As you get closer to retirement, move more of your retirement funds into less risky investments.
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