![]() ![]() Read Viewpoints on : Just 1% more can make a big difference For example, if you are in your 20s, a 1% increase in your savings rate could add 3% more 6 to your income in retirement. Upping your saving just 1% may seem small, but after 20 or 30 years it can make a big difference in your total savings. At the very least, take advantage of your company match if you have one. Got room to up your 401(k) and IRA contributions before you hit the relevant annual contribution limit? Increase your automatic contributions as much as possible. Plus, when you use money saved in an HSA on qualified medical expenses now or in retirement, the withdrawals-of contributions and any investment returns-are tax-free. HSA contributions are pre-tax and tax-deductible. If you have a high deductible health plan (HDHP) eligible for a health savings account (HSA), consider contributing to an HSA to cover current and future health care expenses. With Roth 401(k)s and IRAs, your contributions are after tax, but you can withdraw the money tax-free in retirement-assuming certain conditions are met. Plus, that money can grow tax-free until you withdraw it in retirement, when it will be taxed as ordinary income. Your contributions are made before tax, reducing your current taxable income, meaning you get a tax break the year you contribute. ![]() Make the most of tax-advantaged savings accounts like traditional 401(k)s and IRAs. The road to retirement is a journey, and there are steps you can take along the way to catch up. If you are lucky enough to have a pension, your target savings rate may be lower. Based on our estimates, saving 15% each year from age 25 to 67 should get you there. So, we did the math and found that most people will need to generate about 45% of their retirement income (before taxes) from savings. Some will likely come from Social Security. Not all of that money will need to come from your savings, however. After analyzing enormous amounts of national spending data, we concluded that most people will need somewhere between 55% and 80% of their preretirement income to maintain their lifestyle in retirement. How did we come up with 15%? First, we had to understand how much people generally spend in retirement. ![]() Together with other steps, that should help ensure you have enough income to maintain your current lifestyle in retirement. That's assuming you save for retirement from age 25 to age 67.
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