GRAND RAPIDS, MICH. - It's Money Day on the Weekend morning news! We're helping you get a grip on your finances, specifically, saving for retirement.
Tax and investment expert Phillip Mitchell, from Kroon and Mitchell, offers this advice about getting started:
"If it's a husband and wife, getting them both to sit down and agree," Mitchell says. "If they are not on the same page you really can't get started. If one person wants to save and the other one doesn't ...so getting on the same page.
"I think the second part is figuring out how much can you save. Is there a dollar amount, is there a percentage? So those are two really big things."
He says after you sit down with your spouse to determine how much you can save each month, you need to decide where and how to invest it. "The next part is, what are your options? Maybe looking at your companies, the employer, and they may give you free money or a matching contribution.
Mitchell says that if you put $100 in and you matched $100, that's really the best way to get started since you just doubled your money.
Be sure to take advantage of tools like that and tax benefits -- people who are right out of college or entry level workers, at the lower income you actually have the ability to get a savers credit, meaning the government may chip in from 10-50 percent. Mitchell recommends trying to use all your resources to get the best result.
Traditional IRA or Roth?
With a traditional IRA, you are lowering your income so it's called pre-tax the tax hasn't been taken out and it will be taken out years down the road, so there is really a lot more strategy involved in that. That is a challenge, which one do you determine, it's really based on what your tax rate will be when you retire. So it's actually a pretty complex calculation to determine which one is ideally the best. So it's not straightforward, that is a challenge at times with investing as it relates to taxes, here are these options and one may sound good for most people it may not turn out to be the most beneficial."
So just how much should we be saving for retirement? Mitchell offers this perspective...most people don't have a company pension anymore...now you need to create your own. "The way you do it is you save between 10-20 percent like the company would do on your behalf, the later you start the more you should be looking at 20 percent. So if you are in your 20s and you are saving 10 percent, that may be sufficient. You know, if you are in your late 40s and you are just starting, maybe closer to 20 percent. Really what that allows you to do is determine when do you want to retire. The more you are saving will allow you to retire earlier."
So what should your portfolio look like...Philip says an old rule of thumb is whatever your age, that's your percentage of bonds..and the remaining you have in stocks.
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