{"id":13765,"date":"2022-08-03T13:59:05","date_gmt":"2022-08-03T18:59:05","guid":{"rendered":"https:\/\/johnsonwim.com\/?p=13765"},"modified":"2022-08-03T13:59:05","modified_gmt":"2022-08-03T18:59:05","slug":"saving-for-retirement-on-a-modest-income","status":"publish","type":"post","link":"https:\/\/johnsonwim.com\/saving-for-retirement-on-a-modest-income","title":{"rendered":"Saving for Retirement on a Modest Income"},"content":{"rendered":"
Saving for\u00a0retirement may be smart, but it’s getting harder for many people. Just how big your nest egg should be and how long it might last will depend not only on what you save and invest, but also on how you spend it once you do retire. Here’s how to look for ways to trim costs and keep items in solid condition to stretch retirement dollars.<\/strong><\/p>\n Saving for your golden years can be a challenge for anyone, but it can be a larger challenge for moderate-income earners. This may apply to you if you often end up not having much money left after covering your basic expenses each month and you may not feel comfortable investing in an IRA without a significant initial deposit.<\/p>\n Despite the out-of-control inflation and dire economy as a whole, there are<\/em> some tools available to help moderate-income earners get started with saving for retirement. If you are concerned about whether you can save enough in time for retirement, Johnson Wealth and Income Management can help provide Iowans with the tools that can make it easier to save and invest for retirement.<\/p>\n A recent survey<\/a> found that most Iowans see inflation as a critical issue, and an overwhelming majority, 84%, think the country is headed in the wrong direction. However, due to the nature of spending and saving by Iowa households, most say their finances are about the same or better! Those numbers are down slightly from where they stood during a November 2020 Iowa Poll, when 49% of respondents said their finances were about the same as they had been a couple of years prior. Twenty-three percent said at the time that their finances had improved. So it appears Iowans needn’t be panicked when it comes to falling behind on their savings. But the question remains…<\/p>\n Many retirees report that their expenses in the first few years are not only equal to but sometimes exceed what they spent while working. One reason for this is that retirees simply may have more time to go out and spend money.<\/p>\n It’s common for retirees’ expenses to go through three distinct phases<\/a>:<\/p>\n Of course, future expenses are hard to predict. But the closer you are to retirement, the better idea you probably have for how much money you’ll need to sustain your current standard of living\u2014or support a different one. Johnson Wealth and Income Management’s Fiduciary Amanda Johnson explains:<\/p>\n Some people believe that they need to hit a certain goal or number in their 401k before they \u201ccould\u201d retire. Holding onto that number will set you up for unattainable results. The truth is it really does depend on what your goals are in retirement. Do you want to travel internationally with your sweetheart and see the world? Or are you more of a homebody, someone who would enjoy having the time to garden or volunteer? You see, all of these possibilities come with a varying price tag.<\/p><\/blockquote>\n Asides from having a Fiduciary to teach and guide you along the way, start out by using one of our Financial Calculators. <\/a>These free online tools can help you paint a better picture of what your retirement might have in store.<\/p>\n A survey<\/a> conducted by The Association for Financial Counseling and Planning Education\u00ae (AFCPE),found that 37% of Iowans have less than $5,000 saved or invested for retirement. The survey also found that almost half of all respondents have no retirement savings at all.<\/span><\/p>\n A great way to help combat this shortfall is to automatically enroll in a 401(k) plan. Automatic enrollment is an effective tool to help increase the number of Americans saving for retirement. It allows employees to be automatically enrolled in a 401(k) plan and increase their savings rate over time. This helps ensure that Americans, particularly low income Americans, have a simple pathway to boost retirement savings. Automating your savings will ultimately help ensure that you don’t miss out on the benefits of compound interest and compounding growth.<\/p>\n Landing a job that offers a pension plan is like finding a needle in a haystack these days. If you work at a job that offers one, you can retire with a promised monthly income that will help reduce the need to save on your own.<\/p>\n Pensions often apply to teachers, fire and police personnel, military personnel, and people who work for the U.S. or a state government. Some private companies, such as Coca-Cola<\/a>, still offer pensions. If you pay off your mortgage when or before you retire, and you also secure retiree health care or Social Security benefits, the pension may allow you to retire without savings.<\/p>\n If you don\u2019t have access to a 401(k) at work or there\u2019s a waiting period before you can begin contributing, you can get valuable retirement saving tax breaks by opening up an IRA. Most economists<\/a> will tell you that it is far easier to get people to save money for retirement through a payroll deduction at work instead of requiring them to open up an IRA on their own.<\/span><\/p>\n However, if the employer does not offer any type of retirement plan, or if the employee prefers to open an IRA on their own, it is still possible for these individuals to gain valuable tax benefits. In order to qualify for these benefits, an individual must meet certain criteria such as age requirements and earning limits depending upon whether they are single or married filing jointly.<\/p>\n A Roth IRA is a great way for Iowans to create tax-free income from their retirement assets. Yet, keep in mind that when you convert your taxable retirement assets into a Roth IRA you will generally pay ordinary income tax on the taxable amount that is converted.<\/p>\n One of the biggest mistakes people make when close to retirement (or any age) is withdrawing funds from their retirement accounts. That’s because withdrawals from traditional 401(k)s and IRAs before age 59 \u00bd trigger a 10 percent early withdrawal penalty and income tax on the amount withdrawn.<\/p>\n About 1.5 percent of assets each year leak out of 401(k) plans when participants cash out as they change jobs, take hardship withdrawals, withdraw funds after age 59\u00bd or default on loans. You can help avoid the taxes and penalty when you change jobs by leaving the money in your old 401(k) plan, moving it into the 401(k) plan at your new job or rolling it over to an IRA. Individuals of all income levels are eligible to convert to a Roth IRA.<\/p>\nAre Iowans Really Struggling?<\/strong><\/h4>\n
\nForty-two percent of respondents to a new Des\u00a0Moines Register\/Mediacom Iowa Poll say their financial situation has remained about the same. Another 22% say they are better off than they were a couple of years ago, and 1% aren’t sure.<\/p>\nHow Much Do You REALLY Need?<\/strong><\/h4>\n
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Save By Default<\/b><\/h4>\n
Secure a Pension if Available<\/strong><\/h4>\n
Open an IRA<\/b><\/h4>\n
Don\u2019t Withdraw Money Early<\/b><\/h4>\n
Consider Moving Your Retirement Date Back<\/strong><\/h4>\n