As we invest years of dedication and hard work into building a stable career, we all dream of having the personal and economic freedom to spend the Golden years of retirement with our loved ones. With careful planning, you can ensure a fulfilling life for yourself and your family with the proper amount of retirement savings.
Allegiance Gold: Retirement Planning
How Much Do I Need To Retire Comfortably?
According to the Employee Benefit Research Institute, nearly half of all Americans have not even tried to calculate how much money they need to retire, presumably because they don’t want to know the number in question. Although experts recommend saving between 15 and 20 percent of your annual income for retirement, this isn’t always possible.
A universal rule of thumb is to replace 60% to 70% of your pre-retirement annual income with a combination of social security benefits, pension (if applicable), distributions from retirement account(s), liquid savings, and income from investments like rental properties, along with their accompanying interests and dividends. In addition to your income, it’s equally important to consider your on-going and variable expenses. Recurring expenses include a mortgage (if it’s not paid off), other installments loans such as for a vehicle, health insurance premiums, daily living needs, and property taxes. You’ll also need to take into account variable expenses to cover aspects like travel and leisure. If travelling every year is on your bucket list, you’ll need to secure a higher percentage of your pre-retirement income and think about reducing certain recurring expenses, like paying off your mortgage and other debts.
An alternative strategy for ensuring financial stability in retirement involves calculating your projected annual expenses during that period, then multiplying that figure by the number of years you anticipate spending in retirement, typically around 30 years. It’s a good idea to be conservative in your estimates — estimate up, not down. Don’t forget to add a buffer for unforeseen emergencies. With this approach, you’ll get a reasonable estimate of the nest egg you’ll need to maintain your desired lifestyle post-retirement.
When Should I Start Saving for Retirement?
No one ever says, “I wish I had saved less for retirement.” Building up a nest egg for retirement takes time, and the earlier you start in your working years, the better off you’ll be as you reach retirement age. The power of compound interest, along with your contributions during your peak earnings years goes a long way. In addition to a 401(k), an IRA is one of the most popular ways to save for retirement because of its large tax advantages. You can put in up to $6,500 a year if you are under 50 and up to $7,500 if you are above 50.
You can count on the trustworthy Allegiance Gold executives to answer any questions you may have about when to start saving for retirement.
IRS Contribution Rules and Limits
If you are eligible to make an annual IRA contribution, you may contribute up to the maximum of $6,500 if under age 50, or up to $7,500 if age 50 and over. As long as you do not exceed your maximum limits, you may contribute as often as you like during the year.
With a Simplified Employee Pension (SEP), your annual contribution limit increases up to $66,000. In addition to the SEP contribution, you can also consider making an additional annual IRA contribution of $6,500 (or $7,500 if age 50+).
The deadline for making an IRA contribution is typically April 15, if contributing for the prior tax year. If contributing for the current tax year, your contribution can be made as early as January 1.
Effects of Inflation on IRA
As inflation rises (and it always does over long periods of time), the same amount of money doesn’t buy the same number of goods. For example, the Bureau of Labor Statistics notes that, in the early 1900s, a loaf of bread cost about 5 to 10 cents. In the early 2000s, that same loaf of bread was priced at approximately $1.00. And from 2000 to 2023, the price of bread increased by approximately 100 percent, hovering around the $2.00 mark.
In 1958, a movie ticket cost about $1. Today, the average is more than $10. Your dollar doesn’t buy as much today as it did decades, or even years ago.
Inflation impacts all investments since the dollars earned today from those investments will buy less in the future. However, precious metal investments, especially Gold, can provide a buffer against inflation simply because they increase in value at such a consistent pace. In some cases, Gold’s value even increases in line with or ahead of inflation.
To learn more about how your Gold IRA works within the overall economy contact the seasoned experts at Allegiance Gold.