Three Keys to Saving Towards Retirement

1/10/20 Ricky Baizas

When it comes to personal finance, saving for retirement can be one of the more difficult topics to tackle. It is hard for many people to envision what their lives might look like 30 years in the future, so planning for retirement is often put on the backburner for things that might provide more immediate returns. How many times have you thought, or heard, “How can I plan for retirement when I don’t have any money to begin with?” Yet, saving for retirement should be an essential planning consideration if you don’t want to rely on the welfare system in your retirement years, or live with your children because you can’t afford to live on your own.

With traditional pensions becoming rarer, other retirement options must be visited to ensure you have enough money to survive in your post-work life. Pensions are generally only offered in government positions and unionized workforces, so other options must be explored and used to maximize the return on your hard earned savings.

The cold, hard truth is that every little bit of savings helps, no matter how big or small the contribution, and starting early will give you a jump start towards your retirement goals. Start saving now for the best opportunity to set yourself up for the future. Although it can be hard to bring yourself to save for something that won’t materialize for (potentially) decades, there are resources in place to help set up funds that will serve you well after your working days are over. Having a trusted financial advisor is a great first step for those who might not be the most disciplined money savers, as they should attempt to hold you accountable for your progress towards retirement.

Below are a few common retirement-saving resources to consider as you plan for your financial future. Some of these options, if not all, may be offered by your employer, but if you’re self-employed a financial advisor can help you establish your own retirement accounts. Banks and credit unions are great resources for retirement planning, and it usually doesn’t cost anything for a consultation with a financial planner. Let’s look at three common methods you can use to save for retirement.


Employers began using 401(k) programs to supplement traditional pensions, but many are getting away from pension programs and are starting to exclusively use 401(k) plans as part of their benefits package. Some employers will match your contribution up to a certain amount, which allows you to accrue funds that much faster. If your company does offer matching contributions, make it a high priority to take advantage of this ‘free money’ by contributing the maximum amount.

Depending on your income and contribution rate, 401(k)s can provide tax advantages, as well. A traditional 401(k) is tax-deferred, but Roth 401(k)s involve post-tax consideration, so there are options to save on taxes depending on what bracket you fall in.

Individual Retirement Accounts (IRAs)

Individual Retirement Accounts, or IRAs, generally have tax advantages that appeal to some investors looking for a way to write off more income. For example, you can write off up to $6000 worth of IRA contributions per year. There are some exceptions to the $6000 rule, but most Americans would fall under this regulation. A Roth IRA, like a Roth 401(k), involves contributions from income that has already been taxed, and you don’t pay any taxes when it comes time to start withdrawing.

IRAs are not offered by employers, so they may not be as “automatic” as a 401(k), but you have more freedom to do what you want as far as investments are concerned. This control may appeal to those who are a little more financially savvy.

Other investment opportunities

If you work for a company that doesn’t offer a 401(k) package and IRAs don’t interest you, there is always the more traditional route of investing, such as in stocks and mutual funds. This method of retirement planning can be structured for your level of comfort with investing and financial management, so even beginners can get in on the action. This situation is also where a financial advisor can come in handy to help guide you toward your retirement goals. A trusted advisor can set up your portfolio in such a way that you are comfortable with what is happening to your money regardless of any economical anomalies. Investing apps such as Acorns and Robinhood offer easy, low-pressure platforms where you can learn and invest at your own pace and with very little initial contribution. On the other side of the coin, your financial future in stocks and mutual funds is largely dependent on the stock market, so there is an inherent risk in this type of investing.

Another popular type of investment for retirement planning is annuities. Generally issued by insurance companies, an annuity is a type of account that matures to a point (at a certain age) where you start receiving paycheck-like income checks. Upon maturation, annuities pay out monthly for as long as you are alive. There are also certain tax advantages to an annuity that may be beneficial depending on which tax bracket you fall in. Be careful, however: the penalties for withdrawing money before the annuity matures can result in large penalty fees. You are allowed to withdraw 10% per year penalty-free, so you are afforded a little leeway should you need to make an emergency withdrawal.

Whether you are a hands-on financial guru or a beginner just getting started, a financial advisor (or even your accountant) can find a program that fits your needs to make sure you’re on the proper track to financial stability in retirement. Regardless of the method in which you choose to save up for retirement, it is best practice to contribute early and often!

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