9 Essential Ways to Fund Retirement

9 Essential Ways to Fund Retirement

Even if you're behind on your retirement savings, there are various ways you can save for and fund retirement. Here are nine ways you can do both.

Social Security: Benefits are based on the highest 35 years of earnings. Every year a person delays claiming, benefits increase by approximately 7% (delaying from age 62 to age 70 results in a cumulative 76% increase). Couples would be wise to explore claiming strategies.

Pension: If eligible to receive a pension, speak to human resources about potential benefits, including if there is an option for a survivor benefit.

401(k) Plans (and similar workplace retirement plans): Up to $18,000 per year plus an additional $6,000 catch-up contribution for those age 50 or older can be contributed annually. If an employer match is available, try to contribute enough to maximize it if unable to save the maximum $18,000/$24,000.

IRAs: Dollars contributed to a traditional individual retirement account are tax-deductible. Mandatory withdrawals (RMDs) start at age 70 1/2, and all withdrawals are taxed at ordinary income rates.

Roth IRA's:  Contributions are made with after-tax dollars, but withdrawals are not taxed. Plus, no withdrawals are required for the account owner.

Health Savings Accounts: Like Roth IRAs, contributions are made with after-tax dollars, but withdrawals are not required for the account owner. Withdrawals are tax-free if used to pay for qualified medical expenses.

Housing: Downsizing and/or moving to a less-expensive area frees up cash and reduces expenses. The first $500,000 in capital gains on the sale of a married couple's home is not taxed as long as basic requirements are met. If you plan to stay in your existing house, a reverse mortgage can provide a stream of income.

Work Longer: Postponing retirement gives you more years to save, creates more time for your savings to grow and reduces the amount of time your savings have to last. Once in retirement, working part-time can provide supplemental income even if it means that more of your Social Security benefits are taxed.

                                                                                                                       

Taxable Accounts: Money saved in bank accounts and traditional brokerage accounts counts as part of your cumulative wealth. Even if you have it mentally budgeted to pay for other things, these savings should not be ignored when it comes to funding retirement expenses.

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