Beginner's Guide to Saving for Retirement

Determine What Your Dream Retirement Looks Like

Where do you want to live?

What is your ideal lifestyle?

This will help you determine how much money you'll need for living expenses, which will help you set savings and investment goals.

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Save

The earlier you start saving for retirement, the more time your money has to grow. Start with what you can.

Retirement Accounts

401(k): Employee sponsored account. Employees can contribute a portion of their pre-tax income into the plan.

The contributions and earnings grow tax-deferred until withdrawal. Some employers also offer matching contributions, where they match a certain percentage of the employee's contribution.

Maximum to Contribute in 2023: $22,500

IRA: Individual Retirement Account, is a type of retirement savings account that you can open on your own.

You can contribute up to a certain amount each year and the contributions and earnings grow tax-deferred until withdrawal. Traditional IRA contributions are tax-deductible retirement.

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Roth IRA: Contributions are made with after-tax dollars, meaning they're not tax-deductible. You can contribute up to a certain amount each year. However, the contributions and earnings grow tax-free, and qualified withdrawals during retirement are also tax-free. There is a 2023 income limit of $153,000 for single filers and $228,000 for married filers.

Maximum to Contribute in 2023: $6,500

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Backdoor IRA:  Allows high-income earners to make contributions by first making a non-deductible contribution to a Traditional IRA and then converting it to a Roth IRA. This strategy takes advantage of the fact that there are no income limits on Roth IRA conversions, allowing you to contribute to a Roth IRA indirectly. It's recommended to consult with a financial advisor or tax professional before implementing this strategy.

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Take Advantage of Employer Match Programs

If your employer offers a 401(k) match program, take advantage of it. This means they will match a certain percentage of your contributions, which is essentially free money for your retirement savings.