Are you nearing retirement age, but still not sure what steps to take to secure your finances for your golden years? For many, pension planning can be a tricky and time consuming affair, but with a little extra knowledge and planning, you can ensure your pension gives you the most out of your retirement years. In this article, we look at some of the steps you can take to give your pension a bit more love.
- Start planning your retirement early
The first step to take when you’re looking to make the most of your pension is to begin planning early. You don’t need to start planning your retirement as soon as you start your first job, but the sooner you do, the better. Planning your retirement savings ensures that your money works for you as long as possible.
Make sure to make a realistic plan depending on your current age and years on the job. The more time you have, the more you can invest in your pension.
If you are nearing retirement age, you still have options. Start by making the most of the tax advantages to save more on retirement.
- Review your pension tax advantages
When you have started planning your retirement, it’s important to look at all the ways you can save more money by leveraging pension tax advantages. These tax advantages can save you a considerable sum of money and help you maximize your retirement savings.
Here are some of the most common tax advantages you can use to save more when it comes to your pension:
•Tax Deductible Contributions: Tax-deductible contributions to your retirement will allow you to contribute more to your pension and save on taxes in the process.
•Tax-Deferred Growth: When you contribute to a pension, any growth in value is not subject to taxation until you withdraw funds.
•Tax-Free Early Withdrawal: With pension plans, you can withdrawal money penalty free before the age of 59 1/2. You’ll still need to pay taxes on the withdrawal, but it can help you get access to money if you need it.
•Tax-Exempt Income: If you qualify, you can also receive up to $2,000 a year from your pension without having to pay any taxes on it.
These tax advantages can add up and give you more money for retirement. Make sure to review your pension plan to determine which of these options you can use.
- Take advantage of spousal contributions
If you are married, you can also take advantage of spousal contributions. Spousal contributions are contributions your spouse makes to your pension plan. These contributions can help you save more money, and they can also help your spouse’s retirement.
This option is especially beneficial if one spouse has a higher income than the other, as the high-income spouse can contribute money to the low-income spouse’s plan, and they can both save more money on taxes.
The spousal contribution limit is $6,000 per year, and both spouses must be under the age of 70 1/2 and be able to contribute to an IRA in order to qualify.
- Consider annuities
Annuities can be an excellent way to save for retirement. An annuity is a contract with an insurance company that gives you a guaranteed income when you retire. The annuity pays out a certain amount of money each month or year for life, which means you will always have a steady income in retirement.
Annuities are a great way to secure your finances for retirement, as you will still receive an income even if your investments take a hit.
You have a few options when it comes to annuities, including fixed annuities and variable annuities. Fixed annuities guarantee a fixed income for life, while variable annuities give you the chance to realize potential higher returns.
It’s important to note that you’ll need to pay penalties if you access money from the annuity before retirement. Additionally, be sure to compare fees, investment options, and other factors when it comes to selecting an annuity.
- Make the most of Social Security
Social Security is an important tier of retirement income, and you should make sure to take full advantage of it. One way you can make the most of Social Security is by waiting as long as possible to receive it. While you can begin receiving Social Security at 62, your benefits can increase by 8% each year you wait until age 70.
Social Security can be an important supplement to your income during retirement, so make sure you understand the best time for you to file for Social Security and the strategies you can use to maximize your benefits.
- Take advantage of rollover options
If you’ve accumulated funds in another retirement account, you can use a rollover to move them into your current pension plan. Rollovers can give you the chance to take advantage of tax benefits you may not have been eligible for with your other retirement plan.
You can also use rollovers if you change jobs or retire. It’s a good idea to move any money you have in a 401(k) or other qualified account into your pension for added security and potential tax advantages.
- Maximize employer contributions
If you’re lucky enough to have an employer that contributes to your pension, make sure you’re taking full advantage of this perk. Some employers may only match a certain portion of your contribution, so make sure you’re contributing enough to maximize the employer contribution.
Employer contributions can be a great way to save for retirement and can make your funds stretch further.
As you can see, there are lots of ways you can give your pension a bit more love. Whether you’re starting to plan for retirement or you’re nearing your golden years, it’s important to review your options and make sure you’re making the most of your pension.
By taking advantage of pension tax advantages, spousal contributions, annuities, social security, and employer contributions, you can maximize your retirement savings and ensure you have the best retirement possible.
