Is it Too Late to Start Saving for Retirement?
Ever catch yourself wondering if you’ve missed the boat on saving for retirement? It’s a thought that crosses many minds, no matter their age.
In this quick video, we address that very question head-on: Is it really too late to start saving for your future?
The answer might surprise you. More importantly, we show you what you can do right now to build a more promising tomorrow. Plus, we share insight into an important (and often overlooked!) aspect of retirement planning: understanding how taxes impact your savings.
Ready to feel more empowered about your retirement journey, no matter where you are today? Reach out to set up a free consultation.
Common Questions About Saving for Retirement
What should I do if I’m behind on retirement savings?
To catch up on retirement planning, consider increasing your savings by maximizing contributions to retirement accounts, such as 401(k)s and IRAs. If you’re over age 50, you may be eligible for additional “catch-up contributions,” which allow you to contribute more than the standard limits.
It’s also worth reviewing your current spending and identifying areas where you can reduce expenses, thereby freeing up more money for savings. Delaying retirement—if it’s an option—can give your investments more time to grow and may increase your Social Security benefits. Revisiting your investment strategy to make sure it’s aligned with your time horizon, risk tolerance, and goals is another important move.
Because every situation is different, working with a retirement-focused financial advisor can help you create a strategy tailored to your needs. Joe Dowdall specializes in retirement planning and helps clients explore options that support their long-term goals—whether they’re catching up or fine-tuning an existing plan.
What is the difference between a Traditional IRA and a Roth IRA?
A Traditional IRA allows for tax-deductible contributions, but withdrawals in retirement are taxed as income. A Roth IRA is funded with after-tax dollars, and qualified withdrawals in retirement are tax-free.
Do I have to pay taxes on my 401(k) balance?
Yes, you generally have to pay taxes on your 401(k) balance when you withdraw funds in retirement, as contributions and earnings grow tax-deferred. Withdrawals are taxed as ordinary income. There are many tax strategies to minimize your tax burden in retirement, and at Worth Asset Management, we help Dallas retirees create a customized plan designed to save them more of their hard-earned money.
Does Texas tax retirement income?
Good news, Texas residents do not pay state taxes on 401(k) or IRA distributions, pensions, or Social Security benefits. However, you still need to pay Federal taxes, and planning for taxes for Dallas retirees is one of the most important things we do at Worth Asset Management.
Transcript
Are you thinking about retirement? Maybe you’re in your 40s, 50s, or even a little bit further down the road. A question I hear all the time is, ‘Is it too late for me to start saving for retirement?’ Well, the short answer, it’s almost never too late to start saving.
I’m Joe Dowdall, a certified financial planner professional at Worth Asset Management. Let’s tackle this common retirement question head-on.
The Right Time to Start Retirement Saving Is Now
First, you need to know there’s no perfect age to start saving. While the earlier you start your retirement savings, the more time your money has to grow, the truth is you should start now, no matter your age.
Catch-Up Strategies for Late Savers
There are specific strategies to help you catch up or decrease your tax burden, and extend your savings further. Think of it like planting a tree. The sooner you plant your tree, the bigger it can grow.
But even if you plant that tree later in life, it still provides shade and bears fruit. The key is to plant something. Understanding how retirement accounts work and are taxed is essential.
Understanding Retirement Account Tax Implications
Many people see their 401 (k) balance and think that’s mine, but the IRS will probably get a big chunk of that too. So knowing what you really have after taxes is essential. Let’s break down some common retirement savings vehicles and their tax implications.
Tax Treatment of Traditional and Roth Accounts
First, we have traditional 401(k)s and IRAs. Contributions here are typically made with pre-tax dollars. That means you get a tax break now, but you pay income tax on your withdrawals in retirement.
Next, we have Roth 401(k)s and Roth IRAs. These contributions are made with after-tax dollars. The perk here is that qualified withdrawals during retirement are completely tax-free. This is significant if you foresee being in a higher tax bracket in retirement.
Also, we have brokerage accounts, which are taxable. They offer flexibility, but don’t provide upfront tax breaks.
Smart Tax Planning for Retirement Accounts
So you pay capital gain taxes on profits when you sell investments. I firmly believe that with the right plan, you can effectively navigate the tax complexities of retirement savings accounts. So if you’re feeling like it’s too late, don’t panic.
Three Key Steps to Get Started Now
Start by prioritizing these three things. First, assess your current financial situation by knowing your income, expenses, and any existing savings.
Next, set realistic goals because even small, consistent contributions can add up over time.
Last, explore your options and understand the different types of retirement accounts that are available to you through your employer or independently. The bottom line is, even if you’re late to the retirement savings game, a smart tax plan can help you stretch your retirement dollars. Are you ready to stop wondering if it’s too late and start planning smarter? Let’s talk.
Book Your Free Retirement Planning Call
Get started today with a free 15-minute introductory call. No cost, no obligation. I can be reached at 469-423-1989 or at joe@worthassetmtmt.com. I look forward to speaking to you.