Save for Retirment Without Effecting Your Pay Check
Most Americans are not saving enough for retirement. As a result, people work later into life, retire into poverty and lack the opportunity to leave anything to their children.
On average Americans only save about 4% of their income, a far cry from the 10 to 15% most experts say is required for a stable retirement. While many generally cannot increase their retirement savings from 4% to 10 – 15%, recent events have created the perfect opportunity for the average person to increase their savings rate to 8% or more without affecting lifestyle.
Here is how to increase your retirement saving by 4% while sustaining the same cash flow as last year.
Your take home pay is about to increase by roughly 2%.
The IRS recently released adjusted income tax withholding tables to reflect the new tax rates under the Tax Cuts and Jobs Act which was signed into law December 22, 2017. Over the next few weeks companies and payroll service providers will adjust their system to correspond to the new tax rates. Under the new tax bill, a single person making $50,000 will have their tax reduced by $1,104 thus increasing take home pay by 2.21%. By contributing this “newly found money” to a tax deferred retirement account, you will receive the same paycheck as you did in 2017 while also saving more. In addition, you can recognize an added tax saving of $165. In another word, you can save on taxes by saving your tax reduction and at the same time invest for the future.
Your annual raise.
Many companies give annual raises around the end of December or beginning of January. On average the increase is between 2 – 3% or $1,000 to $1,500 for a person making $50,000 annually. By increasing your tax deferred retirement savings by the same amount as your raise you would not change your net take home pay and could recognize another $150 to $225 in tax savings.
Obviously, there is no easy answer to solve our nation’s retirement saving crisis. But that should not mean everyone retire with minimal savings. The biggest issue is that people do not want to give up something for a better tomorrow. With the new tax bill in effect and recent raises it is easier than ever to increase your savings with minimal impact on your life style or take-home pay.
About the Author – Phillip Zagotti, CPA is a partner at Zagotti and Burdette CPA, LLC. He can be reached at email@example.com or (832) 800-3347.