Setting Up Your Retirement Correctly and for Maximum Benefit

You should do as much research and take as much time as you need to ensure you’re setting up your retirement correctly and for maximum benefit.

How much do you know about retirement? Better yet, how prepared for it are you? If your answers are “is not much” and “not at all,” you wouldn’t be alone. 

According to a recent report on retirement, 59% of American respondents “accept that they will have to keep working longer, while 36% now believe that they will never have enough money to be able to retire.” 

Not setting up retirement accounts correctly and for maximum benefit may be to blame. Because retirement accounts and documents are confusing at worst, requiring thorough research to understand at best, many people don’t do all they should to secure their futures — and the stats above become their realities. 

Luckily, you can avoid these retirement planning mistakes by setting up your accounts correctly, for maximum benefit, and by ensuring they remain working in your best interest. 

Here are five things to know to ensure you’re following laws and getting the funds you’re entitled to during retirement. 

Financial Literacy and Your Goals for the Future 

First, you should work on your financial literacy. Learn how to create a budget that includes saving for retirement and live below your means so you can reach your financial goals. 

Defining your goals and lifestyle for retirement is also essential. Doing so will help you calculate how much you need to save. Then, you can do further research on which accounts, investments, and plans are best to reach that number. Be sure to account for insurance costs and ongoing healthcare expenses when coming up with your target number for retirement savings.  

You must also know your retirement account options and how to set them up for maximum benefit if you want to get the funds you’re entitled to during retirement. 

Retirement Account Options and How to Set Them Up for Maximum Benefit

Here are two standard retirement accounts and how to set them up for maximum benefit to get you started: 

• Have a 401(k) account with your employer, and they’re matching your contributions? Find out the amount you need to contribute to get the full employer contribution match. Set up automatic deductions for that amount. Also, stay with the company until you’re fully vested in the 401(k) plan. If you have to leave a job, it’s better to roll your 401(k) amount over into another retirement account to avoid taxes and penalties.  

• Have an Individual Retirement Account (IRA)? Do your best to budget for the max contribution of $6,000 per year. If you’re 50 or older, you can contribute more than that amount and grow your savings further. Whether you set up a Roth or Traditional IRA, you’ll receive notable tax benefits. It’s also a good idea to set up automatic deductions from your checking or savings account each month. 

Whichever retirement account you decide to set up, leave the funds in it alone. Making early withdrawals and other deductions from your retirement funds before you’re supposed to could come with a 10% withdrawal penalty and a requirement to pay income tax on the amount. You’ll also miss out on compound interest — meaning you’re missing out on more money.

You should also be knowledgeable about any pension plans and the approximate amount you’ll receive in Social Security benefits. 

Furthermore, attached to each of these accounts is a tax obligation. So, be sure you know what taxes you’re obligated to pay when setting up your retirement account. 

The Taxes You’re Obligated to Pay 

If you aren’t aware of the taxes you’re obligated to pay during retirement, you may make mistakes that bar you from retiring when you plan to — or at all. The taxes you’re obligated to pay depend on the particular type of retirement accounts, investments, and plans you have set up. 

You should go through the details of your accounts and plans to see if you have things set up in a way that minimizes the amount of taxes you owe during retirement. For instance, are you diversifying your income to create a mix of taxable and non-taxable retirement accounts? Are you staying in the 12% tax bracket to avoid taxes associated with capital gains?

With all that’s involved with setting up your retirement, don’t discount working closely with a financial advisor. 

Don’t Discount Working Closely with a Financial Advisor 

If you can and want to set up your retirement alone, go right ahead. On the other hand, get a financial advisor if you aren’t sure where to start or otherwise need assistance getting the maximum benefit possible from your retirement. 

You may want to take things a step further and get a lawyer involved as well, to ensure you understand your benefits, how to acquire the money you’re entitled to, and what to do over the years to keep your accounts positive.  

Lastly, keep a record of all the resources available to you to help you learn more about the correct way to set up your retirement.  

Resources Available to You to Learn More About Setting Up Your Retirement Correctly

You’ll have a better chance at setting up your retirement for maximum benefit if you take advantage of all the resources out there to help you. 

Bookmark government websites like ssa.gov, usa.gov, and dol.gov for information on retirement and how to get the most benefits from your accounts. Read books, blogs, and other literature on how to best set up your retirement. Also, lean into social media. Follow retirement and financial experts and see what they’re saying about how to set up your retirement for maximum benefit.  

Conclusion 

You should do as much research and take as much time as you need to ensure you’re setting up your retirement correctly and for maximum benefit. The above will help you get on your way and live the life you want during retirement.