Use These 7 Strategies to Plan for Your Retirement

Gina Deveney
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If you're hoping to retire as soon as possible, make sure you're investing wisely. The best retirement savings defer any taxes until the money is withdrawn, or offer tax-free disbursements upon retirement. Preparing for retirement doesn't need to be stressful if you focus on multiple investments to maximize your retirement income.

1. Open an IRA

An IRA offers you one of the best ways to take control of your retirement savings. You can invest in an IRA even if you have other types of retirement plans, and the earnings grow tax-deferred. Traditional IRA contributions are tax-deductible with withdrawals at retirement taxed at a standard rate. Younger workers with income in a lower tax bracket may want to consider a Roth IRA. Contributions to Roth IRAs are taxed the year they are made, but withdrawals after retirement are generally tax-free.

2. Maximize 401(k) Contributions

If your employer is matching your 401(k) contributions, look to increasing your contributions before considering other tax-deferred savings options. Remember that every dollar you invest with matching contributions is doubled for twice the retirement income. These 401(k) contributions are also made with pre-tax dollars for more tax savings. Keep in mind, legislation could reduce 401(k) contribution limits or change how this type of plan works. For more security, include multiple investment strategies when preparing for retirement.

3. Put More Into Your Health Savings Account

Although not a traditional retirement investment tool, your health savings account offers you another way to put aside more pre-tax dollars for use after you retire. Money in your health savings account does not expire and is easily portable if you change jobs. Withdrawals for health care expenses are never taxed, but after age 65, you can withdraw money tax-free for any reason.

4. Save Your Tax Refund

Investing your tax refund every year is a simple and effective method of preparing for retirement. To avoid the temptation of spending the refund, have it directly deposited by the IRS into the savings account of your choice.

5. Buy a Whole Life Insurance Policy

Whole life insurance policies provide another option for tax-deferred savings. This type of insurance policy does not have an expiration date, and the policy can be cashed out if you need the funds. Life insurance is fairly inexpensive for young, healthy individuals, and many policies offer you some control over how your premiums are invested.

6. Consider a Real Estate Investment

When preparing for retirement, don't forget to consider real estate. Any gains in worth are not taxed until you sell, and even then, may fall into a fully or partially tax-exempt category.

7. Talk to an Investment Adviser

Perhaps the most important part of preparing for retirement is consulting with professionals who can advise you on tax laws and the best investment strategies to meet your specific needs. Look for someone with excellent knowledge of tax law as well as experience in retirement planning.

It's never too early to begin preparing for retirement. Talk to a professional and draw up a plan to maximize your retirement income while reducing tax liability on your investments. Consider investing in several different areas to increase the amount you invest for a possible early retirement and a great quality of life during your post-work years.

Photo courtesy of Stuart Miles at


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