Working Longer Can Increase Retirement Security That may include downsizing your home or picking up a side hustle or second job. For those who are further behind in their retirement savings, more drastic steps may be needed. Second, it means you will need less money in retirement to live comfortably.Ī few areas where people focus on reducing their expenses include restaurants, cable/satellite service, and driving cars a little longer. First, it frees up more money to save for a secure retirement. I could go on all day. Keeping lifestyle inflation from creeping in helps in two ways.
You buy nicer bottles of wine, stay at nice hotels, drive nicer cars, and spend more money on clothes. This is often called lifestyle inflation. MORE FROM FORBES Tax Mistakes In 2020 That Could Ruin Your Retirement By David RaeĪs we age, it seems to be easier to spend more and more money. Higher earners will also likely need to save into a post-tax investment account, beyond their 401(k) and Roth IRA. But, you will not get a tax deduction when making contributions. This money will grow tax-free and come out tax-free in retirement. It is also recommended to put some money in a Roth IRA, if you are eligible.
Ideally, with smart tax planning, you will still be able to stay in a lower tax bracket in retirement than when you were working. If you are withdrawing $10,000, per month, from your 401(k) in retirement, you will not be netting that amount. Make sure you account for the cost of taxation when you retire. You will not owe taxes on your 401(k) until you make withdrawals.
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