Stephen Fowler |

For many young Americans, and some older ones as well, saving for retirement just isn’t much of a priority. One reason for this could simply be a lack of understanding about how the process works. We are now aware of the power of saving for retirement – and the fact that earlier is better. This month, our goal is to provide some level of basic understanding about the process of saving for retirement and discuss some of the tools that are available to help us in doing so.

  • Start now. You’re never too young to start saving for retirementThe sooner you start, the more time you allow your money to collect compound interest and multiply.


  • Don’t get overwhelmed. It’s easy to be intimidated by all the statistics and jargon involved with finance and investments, but this stuff really isn’t as scary as it seems.


  • Social Security can no longer be depended on. It’s no secret that Social Security benefit payments (money out) will exceed contributions (money in) sometime around 2037. For younger Americans, while some form of government-sponsored income is possible when we retire, it won’t be enough to live on. We must take charge of our own retirement. If we don’t save now, then retirement may not be an option down the road.


  • The 401(k) is your friend. 401(k) is a way to save for retirement using payroll deductions through your employer. The money you contribute now is “pre-tax” – meaning the funds come out of your paycheck before taxes, grow tax-free, and you’ll pay taxes when you take the money out of the account.


  • IRAs are also your friends. You can start one of these Individual Retirement Accounts at any time if you have earned income. A Traditional IRA works very similarly to the 401(k) in that the money you put in is “pre-tax, grows tax-free, and you will pay taxes on it later when you take it out. There is also the Roth IRA in which you fund with after-tax” money, the money grows tax-free, and no taxes are owed when the money is taken out of the account. For those that are self-employed, you may open and fund a SEP IRA – allowing you to save even more pre-tax money than the regular Traditional IRA.


  • There are LIMITS. The IRS sets the maximum amount you can contribute to tax-advantaged retirement accounts every year. In 2024, savers under 50 can contribute up to $23,000 in their 401(k). The IRA contribution limit for savers under 50 is $7,000.


  • You can do BOTH. If you contribute to a 401(k) plan at work, you can also open and contribute to an IRA. This means that in 2024, you could contribute and save up to $30,000 for retirement = $23,000 + $7,000.


  • Many employers “MATCH” 401(k) contributions. If your employer has a 401(k)-match program, they’ll help you save for retirement. The most common match is 50% up to a maximum employee contribution of 6%. This means if you save 6% of your annual salary, your employer will match half of it (3%).


  • NOT taking advantage of a match is like giving up “FREE MONEY.” If someone told you they would put $10 into your savings account for every $20 you put in, it’d be foolish not to take them up on their offer. That’s essentially what an employer match does. By declining to take advantage of it, you’re basically throwing away free money.
  • A sound contribution strategy – Contribute enough money to your 401(k) to take full advantage of the employer-match, then open a Roth IRA and MAX out the contribution to it ($6,500) since your money grows tax-free and isn’t subject to future tax-rates. If you’re able to save more after doing this, make more 401(k) contributions.


  • Whatever you do, DO NOT cash out. Tax-advantaged retirement savings accounts were created by the government to encourage us to save for retirement. One of the rules of using these accounts to save for retirement is that the money has to be left in them until you reach age 5. If you choose to pull funds from these accounts and cash out some or all of your savings before reaching this age, you will have to pay a 10% penalty on top of the federal and state taxes you will owe on the withdrawal amount. Once money is contributed and invested, don’t touch it. Instead, leave it there and let it grow until you retire.


  • Old 401(k) from a past job – Roll It Over. Whenever you leave a job, your 401(k) does not. It stays where and how it is when you leave – you have to take action to move it elsewhere. In this situation, it’s probably in your best interest to either roll it over into your current 401(k) if possible, or roll it over into an IRA wherever you choose. You have some time, but there are cases where the employer may automatically give you a cash dispersal if you don’t roll it over within a certain period of time. When this happens, you’ll have to pay taxes and that 10% penalty. If you have an old 401(k) from a past job or if you have one at your current job and are about to leave, let us know. We can help you through this process to ensure your hard-earned money is moved to the most appropriate place.


  • Ask for help when you need it. We are here when you have questions or need help. This is what we do. We can guide you down the right path – whether it be setting up an IRA account and managing your investments, rolling over an old 401(k) from a past job, helping you select which funds to use in your 401(k), or identifying the appropriate level of risk to take on. We can simplify the retirement-savings process – making things easier on you.

In closing, the most important thing to remember is to Keep It Simple. You don’t have to be an expert on investing to start saving for retirement. In fact, it’s probably best if you just ignore what the stock market is doing altogether. The key is to make contributions. Something. Anything. Take advantage of the tools and resources available, and contribute what you can. You don’t have to go down this road alone. Let us know how we can help.



401(k) limit increases to $23,000 for 2024, IRA limit rises to $7,000 | Internal Revenue Service (