Suze Orman TwitterSuze Orman FacebookSuze Orman YouTubeSuze Orman LinkedIn
View Blog & News List

The Four Steps to Retirement Saving

April 30, 2015 at 12:00 PM

Saving for retirement is a no-brainer. But knowing the smartest ways to do that saving is anything but easy to figure out, given all the choices. Don’t worry, I’ve got you covered. Here’s exactly what you should do, in the order I list:

1. If you get a matching contribution from your employer, save in your workplace 401(k) or 403(b). Contribute only enough to qualify for the maximum matching contribution.

No workplace match, or no workplace retirement plan? On to step 2:

2. Save in a Roth IRA. The prospect of having tax-free income in retirement makes a Roth IRA a great deal. There is no upfront tax break that you can sometimes claim if you save in a Traditional IRA, but that’s okay. I want you to focus on the end goal: no tax on withdrawals with the Roth vs. having to pay income tax on every penny that comes out of a Traditional IRA.

2A. For High Income Earners: Consider a Back Door Roth IRA. Above certain income thresholds you are technically not allowed to contribute to a Roth IRA. But there is a totally legal and smart way to save via a Roth IRA. First make a contribution to a Traditional IRA. Then within a few days convert the Traditional IRA to a Roth IRA. As I said, this is completely legal. If you do not have any existing Traditional IRAs this is a smart move; you will likely owe no income tax on the conversion, and once your money is in the Roth IRA you will not face any tax on withdrawals made in retirement.

If you do have existing Traditional IRA accounts (including Traditional rollover IRAs) there will be a tax bill due in the year you convert. Consulting with a tax pro is advised.

3. Save (More) in your 401(k). Able to save even more? Okay, use your company plan if you have one. Boost your contribution rate so instead of just saving enough to qualify for the match, you instead are saving even more.

4. Save in a Regular Taxable Account. As long as you hold an investment for at least one year, any investment profit you have when you sell will be taxed as a long-term capital gain, not income. And the good news is that long-term capital gains rates remain very low-typically 15% for most investors−so the tax bit isn’t going to be too bad. Invest in low cost index mutual funds and exchange traded funds and you can minimize any tax bill while you own the shares, as well.

Tag Cloud

confident of solutiongrandparent IRA contribution schedule vacationsame sex marriage band end FloridabudgetOverspendingVeterinary Schoolsocial securityspecial saving accountInfluentialsSuze Orman spouse Kathy Travisemergency fund Long Term Care Insurance Suze Orman Scholarshipgift not loandental insurance would you decline a bonushighest possible benefitrequired disclosureleave a legacyis it necessary?buy homeCOLAUS Tax Codecredit cardadult childrenyours, mine & oursreduce interest rateretirment savingsdangerous money seasonpaid in fullPrime Rate Rise 2015replace permanent life insurance with termHSA tax savingsgrandchild summer job IRA contributiontax ID theftburn outsave moneykeep a schedule3% debt transferred Giftspay high rate off firstdon't spend always use all paid time offFederal Funds RateExhibitionsetup automatic savings withdrawdon't defer interest paymentscontribute household expenses television hostis it necessaryreal estate marketvalentines daystudent loan repayment planage appropriate goalspush yourself to save more for retirementstudent loan repayment estimatorHow To Build Creditsocial workpay down car loan!00% tuition paidinitial tax break no late fee get credit cardco-sign Moneyhigher insurance deductibleearn allowanceaffordable premiumAlarm Clockpay 100% cashHDHP home buying mistakeslong-term care buy home you can affordresponsibleidentity fraudMoney-Savingprotect your familyhealthy youmanage student loansdon't charge a pennyemployer offered life insurancesavings pleasurecan you afford itraise insurance deductiblebe true to yourselfhome loan credit score below 740 life insuranceIRA contribution gifted moneyallowance taskgift grandchild IRA contributionUniversity of Floridacredit reportcut monthly cable billlong term goalone annual feeholiday spendingfederal student loan deferment social security never insolventpaid vacationPost-Divorcetitle insurancecompare monthly expensesdon't ignore open enrollmentdo you need life insurancepay down student loan debttake actionLTCsave buying car 2016speak new goalpermanent life insuranceemergency fund savingscredit managementlow down paymentdebt freeborrowing plan consider roth 401(k)raise deductiblescostly insurance mistakeARM Cautiondeath benefit needs for family10% donate to charitylower rateStudent Debt Crisis3 savings buckets comparison shoppingMother50 over 50public service loan forgiveness programlousy investmentspring summer Ashley Springerfull retirement age20% down paymentretirementbe kind to yourselffinancing car cut monthly cellular billTeachwomen long term careFinancial8 Rulesbreakdown projected monthly housing coststudentCNBCpay more than minimumSuze Ormanproperty taxChanging Livesborrow each year, capitalization is going to pile up gay marriage ban end Florida lower overall drug costunsubsidized Stafford loanfile taxes quicklyteach importance of helping othersoverspend on giftsshort term goal Financial AdviceGiftallowanceInvest for savings growthFHA loan feesavoid burn outFixed Rate Mortgageoverspend on nights out40% toward financial goalSuze is my biggest mentorsame-sex marriagePhyllis Shelton expert long-term careSandy Hook PromiseFICO credit score credit card mortgageis it kind?retirement planuniversal college accessstandard deduction origination feesapproved medical 100% tax-freemental healthRoth 401(k)stay positivehome budget after tax costreferrals Richteens and moneysidelinedreal estate mistakes20% equityadjust allocations Student Loanlife insurance name trust as beneficiarypercentage of women widowed 75-84Suze changed my lifebest loan deal Stock Investmentsloved ones dependent on income4 Must Have Documents better termsdental savings planNewtownget health insurancepay interest while in schoolprotect loved ones store credit cardsiffy incomebetter loan ratesreduce withholding6 month waiting periodHDHP/HSApreexisting condition not coveredcharges on credit cardbest interest ratesface your financial fearmax employer matched 401(k) contribution401KForbesSave Us Moneyloan no longer than 36monthsbalance transfer overcome financial fearsincrease retirement savingsbill paying prioritiesPersonal FinanceFinancial Solutions For Youswitch to roth 401(k)closing costs 2% of loancost of capitalization calculatorhealthy retirement weightprescription tierBankSuze Orman's Money Warsrollovercar loanloan big picture better loan dealsno life insurance financially irresponsibleCPI-WFICO Scorewrite new goalincrease emergency savingsfile asapsecured cardteach your child good money habitsGracephysical healthhigh FICO scoreHoliday Seasoninterest capitalizationHigh FICO Score = Better RateConventional loan PMImortgage interest tax deductionLovesecure creditmax benefit coveredgift up to 14,000insurance yearly reviewmobile appmonthly benefit workaholicalternative FICO scoreCredit score3 step financial road mapsmall changes Final Goodbyerising home pricesPay Off Debt Before RetirementCory BookerMass MutualAccuQuote.comrequire chore in exchange for allowanceRevocable Living Trust20 to 25 times annual incomeBeautyFRAjanuary billsmarriage financial responsibilitydon't blow tax refund2017 TaxesBill and Pennystretch out haircut appointmentsAdequate Auto and Home Insurance740 credit scorefinancial concernwomen live longer8 month emergency funddon't use allowance as bribeno fee transferfinancial fearsbad decisionshigh credit score discountopen enrollment review no tax on withdrawlshigh deductible health care planstudent loan repaymentFinancial Power of Attorneychildren's bookautomate student loan paymentsannual cost of living adjustmentMarlo Thomasincentives for health care wellness screeninghigh down paymentPrime Rate Increaseno private loanbig results confidentat worst still pay 75% benefitpublic service career student loan repayment SelectQuote.comincreased auto insurance premiummake saving a pleasureonly refinance if it paysderailed planStaffords this year have a fixed 6.8% interest ratelet them have 50% controlterm life insurancehome ownershipcommunity collegeFiscal ResponsibilityCredit Card Interest Ratecredit utilization ratecnbc alarm clocklowest cost fund optionLong Term Care premiumsidentity theftForbes Top 10age appropriate choreworst financial mistakestandard rateclosing feesprotect dependent get over life insurance phobiaCommencementpurely financial standpointrent vs buymortgage disclosureEasy Life Insurance emotional stakeslong term careresponsible with moneyOne Wallet At A TimeBankruptcycollege student3 bucket approachSandy Hook Elementary Schoolfamily save at least $100 monthlyYoung Adult Jose Rodriguezmaintain standard of livinglower premiumpowerfulno waiting periodsuccessverify wellness screening and programsback-to-school budgetFinancial Educatorpositivetax refund fraudautomatic withdraw to savings Gay Couplesreduce monthly paymentschool value moneylow mileage discountget the most out of social security car leasingpercentage men widowed 75-84under 18 financial giftincrease retirement contribution ratebe good exampleSpendingFinancial AwarenessMost Influential Celebrities Listback door Roth IRAteensfinancial goal phrase10 year repayment plan savings401(k) Contributionsloan necessityHigh Credit Scorecommunity bankitemized deductionnot enough life insurancefocus on new truth raise your deductiblelower mortgage interestpaying for collegeUrbana-Champaignpresident Obamaritual scheduledental discount planinsuranceFinancial System2015 financial roadmapknow before you oweadvice for college graduateslow-cost index mutual fundWall Streetnear historic lowsplanSatisfyingonly offered while employed no retirement funds for down paymentfinancial argumentscollege graduatehome related tax break bonus escrowcalculate dependents annual income needsAmericans don't use all paid vacation timepay off debtInfluential CelebrityTelepictureswaive home inspection bidCivil RightsEmergency Savingsno apologyrepay student loanscreate new truthAmy Lacyetunexpected expenseHeartnegotiate points with bank or sellerwives should be involved in retirementdon't cover cosmetic dentistryMortgage Credit Availability Indexmoney-aware childdangerous retirement planprovider of financial supportPBS Specialadd teenFICO at least 720HDHP's are good for you20 year level term Financial Awareness Video Festivalmax employee matchHoliday Shoppingprotect and provide for minor child student loan debtmoney vowsmortgage brokerpoint cost offset by savingslearn good financial choicesAARPkids schedule paymentsUniversity of Illinoisfraudulent returnlow credit scoreSchool of Social WorkRetirement SavingsGoodbyerefundAARP Social security calculatorlive below your meansETF'swomen outlive menForeclosureFree Debt EliminatorFundscredit unionstaycationBaby Boomersgraduationno splurge do not pay allowance for good behaviormarriage inequalitythree year car loanswitch to spouse coverageGay Rightschildren under 18exercise reguarlyhealthy retirement blood pressurebuying a carFinancial Gift CliffHDHP'sjuggle multiple financial goalsno interestdoctors in networkhousing markettaxesEmployer Matched Contributionhome buying seasondebtfour steps to retirement savings LTCi ASAPignore 6 month grace period women longer life spanone credit cardpremiumThe Suze Orman Showletter to suzedream schoolclosing disclosureautomatic paymentlong-term care premiumsSuze approvedhealthy aging don't buy wantsmeet monthly term insurancestrained relationshipheartacherefinancemonthly dental insurance premium2015 record year car sales20% down payment avoid feesloan is giftCommunication Skills ARMInterest15-year refinance dealcouple financesCollege of Veterinary Medicinedear suzeMoney Marketemployer funding HSAshop online guaranteed level term policyquick closingenjoy saving debit cardDurable Power of Attorney for Health Caredon't extend mortgage commitcar buying mistakesFinancial Cliffinsurance mistakemultiple lendersdon't do five year car loanhome buying budgetzero rate transfer dealstraditional vs roth 401(k)no sneaking in feessocial security not going brokeLTC shoppinginterest on student loansNew american Dream 19 years cash flow problemmortgagebad retirement planningWarner Bros Television GroupRetirement Incomeroth irabecome member summer job match income Student Debtbuy down Lifestyle2016 adjust estimated taxLong Term Care shoppingdepreciating asset retain separate credit cardsultimate compounding giftEric Dodge high premiumscontribution financial independenceAuto Savings anticipated salary8 month safety netfocus on needsCredit Card Rate IncreaseHDHP's are not baddoctor no longer in networkretirement accountsdon't derail retirement savingsoverspend on dining outcompare provider pricingnew car2016 adjust withholdingverify retirement plan with HR or plan sponsoris it true? not gender specific kid borrow firstWashingtonpay credit debt ASAPpeace of mindCiti Simplicity Card death benefit 20 to 25 times annual incomeNew York Lifehome insuranceno negativityHoliday


View Blog & News List
People First. Then Money. Then Things.
Connect with me on Facebook Connect with me on YouTube Connect with me on Twitter
© 2017 Suze Orman Media Inc. All rights reserved.
 
 |  Search  |  Sitemap  |  Privacy  |  Terms
Sign Up For E-mail Offers
Open Panel
Close Panel