NEW YORK — The Tri-State area could be one of the most expensive places to retire when considering health care costs, taxes, the impact of inflation and income. On the other hand, the US Department of Labor notes that only half of Americans have calculated how much they need to save for retirement.
In 2020, more than a quarter of private sector workers with access to a defined contribution plan (such as a 401(k) plan) did not participate. The average American spends about 20 years in retirement, the department adds.
Only 28% of Hispanics have a 401k retirement account. We spoke with a financial expert about the benefits of having a retirement plan.
There is a well-known rule that can help you save. It’s the 50-30-20 rule. This means that 50% of net income is spent on necessary expenses, such as transportation, rent, and food. 30% of your net income would be for expenses such as entertainment or wishes including entertainment and travel. And the remaining 20% would be used for savings, which in this case would also include retirement.
Although this is a recommended rule, the important thing is that if you can’t save that 20%, always try to take a percentage of your income to save for your future, short and long term. .
Here we explain what you should keep in mind to prepare for your retirement according to experts and the Ministry of Labour:
- Start saving, keep saving, and stick to your goals: Saving is a rewarding habit. If you’re not saving, start small if necessary and try to increase the amount you save each month. The sooner you start saving, the more time your money has to grow. Make retirement savings a priority. It’s never too early or too late to start saving.
- Know your retirement needs: retirement is expensive. Experts estimate that a person will need 70-90% of their early retirement income to maintain their standard of living when they stop working. Take charge of your financial future. The key to a secure retirement is to plan ahead.
- Contribute to your employer’s retirement savings plan: If your employer offers a retirement savings plan, such as a 401(k), sign up and contribute as much as you can. Your taxes will be lower, your business will be able to earn more, and automatic deductions will make your job easier. Over time, compound interest and tax deferrals make a big difference in how much you’ll accumulate.
- Find out about your employer’s pension plan: If your employer has a traditional pension plan, find out if you are covered by the plan and understand how it works. Before changing jobs, find out what will happen to your retirement benefits.
- Consider the basic investment principles: How you save can be just as important as how much you save. Inflation and the type of investments play an important role in the amount you will have saved in retirement. Know how your savings or retirement plan is invested. Learn about your plan’s investment options and ask questions. Place your savings in different types of investments. By diversifying in this way, you are more likely to reduce risk and improve returns. Your investment mix can change over time depending on many factors, such as your age, goals and financial situation.
- Don’t touch your retirement savings: If you withdraw your retirement savings now, you will lose principal and interest and may lose tax benefits or face withdrawal penalties. If you change jobs, leave your savings invested in your current retirement plan or transfer them to an IRA or your new employer’s plan.
- Ask your employer to start a plan: If your employer does not offer a pension plan, suggest that they create one. Several savings plan options are available. Your employer may be able to put together a simplified plan that can help both of you.
- Deposit money into an Individual Retirement Account (IRA): You can deposit up to $6,000 per year into an IRA account. You can contribute even more if you are 50 or older. You can also start with much less. IRA accounts also offer tax benefits. When you open an IRA, you have two options: a traditional IRA or a Roth IRA. The tax treatment of your contributions and withdrawals will depend on the option you choose. Additionally, the after-tax value of your withdrawal will depend on inflation and the type of IRA you choose. IRA accounts can provide an easy way to save. You can set it up so that an amount is automatically deducted from your checking or savings account and deposited into the IRA.
- Find out about your social security benefits: On average, Social Security retirement benefits can replace 40% of the pre-retirement income of retirement beneficiaries. Define when you will start collecting your social security, the longer you wait, the more money you will receive. You may be able to estimate your benefit using the retirement calculator on the Social Security Administration website. For more information, visit their website or call 1-800-772-1213.
- One of the most important recommendations from experts for preparing for retirement is knowing what your short-term and long-term goals are.
- Look for new ways to cut expenses, for example, cable service.
- Plan for the unexpected.
Changes that have been approved for the pension and retirement system force many employers to automatically enroll their workers in the schemes. Telemundo 52 Responde tells you how they can be useful to you.