2020 has scrambled a lot of our expectations, so let’s check in on whether your retirement plans are still on track.
Don’t be frightened. This is an exercise intended to get you to focus on your numbers. I’m not going to scare you with another retirement calculator that says you need to be a multimillionaire to have a decent retirement — certainly not in the middle of a once-in-a-lifetime pandemic.
Use this tool to give yourself a sense of where you are financially, so you can make better decisions about what you need to do in the coming years to retire when you want, with enough money to live comfortably. We’ll be making some back-of-the-envelope calculations to figure out whether you’re on track. We might not be able to capture everything about your individual financial situation, but it’s a place to start.
You can retire happily within your means. Let me help you get ready.
Sometimes your dream retirement doesn’t match up with economic realities. If that’s what is happening, you have to be willing to consider changing your plans.
Here’s a link from the IRS that explains the difference between a traditional and Roth IRA.
The maximum annual contribution isn’t as high as a plan offered by an employer, but you can still save up to $6,000 for 2020. There’s also a catch-up provision that allows you to save an additional $1,000 if you are 50 or older.
If you qualify, contributions to a traditional IRA are tax deductible. However, be aware that the amount you can deduct may be reduced if you or your spouse is covered by an employer retirement plan.
A Roth account is funded with after-tax dollars, making future withdrawals tax-free.
One major plus in saving through a workplace retirement account is that an employer will set everything up and take contributions from a worker’s pay, making it easier for people to save. But on your own you can set up an IRA so that contributions are made automatically from your bank account.
Check with your financial institution or contact an investment company to learn more about how to invest in an IRA.
If you’ve done your homework, then absolutely give out of your abundance. Maybe you open and contribute to a college savings plan for your grandchildren. You might give more to charitable organizations. Think about giving to scholarship funds that support students at your alma mater. Whatever you decide, come up with a giving plan so that you target your extra funds toward the things that matter to you.
About this story
None of the information you enter into this tool is collected or saved by The Washington Post. Note that this is an informational tool only and does not constitute investment advice. You should seek the advice of a financial services professional regarding personal finance issues. The results presented by this online tool are hypothetical and for illustrative purposes only, and The Post is not responsible for any decisions or actions taken as a result.
Illustration by Shakira Savage