Finding Financial Freedom in Retirement: How To Save So You Can Spend

Retirement looms over the minds of every individual in the “Red Zone,” or those who are within ten years of their target retirement age. This period in life can be very stressful, as you are likely worried about your future and unsure of whether or not you’re adequately prepared.

However, worrying won’t solve these problems for you. It’s essential to work with your Sovereign advisor to answer your questions and create a plan for a meaningful and financially prepared retirement.

When Should I Start Budgeting and Investing for Retirement?

The simple answer is right now! The earlier you start, the more freedom you’ll have once you reach retirement age. You can even have your kids start saving a small portion of their paychecks when they begin college to instill the habit of saving in them.

However, to save smart, you need to know all of your options. Simply putting away money or relying on your social security is not the easiest or best way to plan for your retirement. Below are a few different options you have to help your retirement fund grow:

Types of Retirement Accounts to Consider

  • Traditional and Roth 401(k) – This is one of the most common types of retirement accounts, often offered by an employer to help you save. The money you put in may have deferred taxes, or you may be able to withdraw it tax-free once you retire, depending on the type of plan you choose or that is offered. 
  • 403(b) – A 403(b) is similar to the 401(k), except it is offered by nonprofits and government institutions such as schools. These function similarly but provide unique tax advantages to the employer as a non-profit organization. 
  • Traditional and Roth IRAs – IRAs function similarly to 401(k) plans but offer more flexibility as they are provided outside a place of work. Typically, IRAs don’t have limits on the amount you can invest, and you can choose to defer taxes or pay now and enjoy the withdrawals tax-free in retirement. 
  • One participant 401(k) – This option is made for the self-employed and allows you to save as much as you would if an employer offered you a 401(k) plan. 
  • SEP-IRA and Simple IRA – These accounts offer options for small business owners or self-employed individuals to contribute to their employees’ retirement savings at an affordable rate. They provide more flexibility than traditional 401(k) plans for businesses and make it easy for you to save for retirement as a sole proprietor. 

What Do I Want My Life to Look like When I Retire?

Retirement doesn’t look the same for everyone. Some people want to spend more in their younger years or on their families and live a humble life when they retire. Others are excited to take advantage of the time for travel, luxuries, or side businesses they didn’t have time for when they were working. How you want your retirement years to look like will determine which retirement strategy is right for you. The earlier you plan, the more options you’ll have.

Contact an advisor today to talk more! 

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