How to Double your Retirement Income

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bankingsense.com

You get a job with a company that offers a 401k with a match.  What do you do?  You do what you’ve been told to do.  You contribute what you need to get the max contribution from the employer.  For me, I contribute 6% and get a 3.5% match, totaling to 9.5%.  I am nearly saving 10% of my salary in my early 20’s.  I’m doing a good job of preparing for retirement right?…  Well yes and no.  ALWAYS, I repeat ALWAYS, contribute what you need to your 401k to get your company match.  It’s FREE MONEY.

This is where I will tell you about the easiest way one can double his or her retirement income.  It is through a Roth IRA.  You see a 401k is pre-tax money, so you will pay taxes on your withdrawals in retirement along with whatever social security you are receiving at the time.  Combine social security and your 401k and you will have only 75% (assumming a 25% income tax bracket) of the income you receive during retirement.  A Roth IRA allows you to pay taxes on the money now, so regardless of what tax bracket you are placed in the future you can keep all of the income you withdraw!

Check out the spreadsheet I have attached to truly see how a Roth IRA can double your retirement income.  Keep in mind also with a Roth you never owe taxes and with your 401k you will.

Actionable step for the day, set up a Roth IRA!

To project your retirement income with a 401k and a Roth IRA, simply enter your salary into the cell along with your contribution and your employer match and watch the pie chart on the left shift!  Consider increasing your 401k contribution at work for more income in retirement.

Retirement Calculations

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