Studies show that fewer Americans are saving money. At the same time, personal debt levels are increasing. If you are behind the curve on your savings goals, consider setting up an automatic savings plan. Here are three ideas:
- Make a monthly contribution to your individual retirement account (IRA). Pick an investment vehicle, such as a mutual fund. Then arrange to have $166.67 per month automatically transferred from your bank account to your IRA investment. You may find you're more likely to make the maximum $2,000 annual contribution if the amount is broken down into smaller chunks. An added benefit: A monthly contribution can accumulate more earnings than if you wait until the end of the year (or until April 15 of the following year) to make your contribution.
- Contribute the maximum amount you can afford to your employer's retirement plan, such as a 401(k) or SIMPLE plan. Retirement plan contributions are withheld from your paychecks. That means you'll pay yourself first, before you receive your take home pay. Also, you won't have to pay income tax on those wages until you withdraw the money from your retirement plan. For 2001, you can contribute up to 15% of your wages or a maximum of $10,500 to a 401(k) plan. You can contribute up to $6,500 to a SIMPLE plan this year.
- Save consistently. Establish a short term emergency fund outside of your retirement account. For example, automatically transfer a set amount each month into a money market account. Because the amount you invest remains constant, you can more easily budget for it. And by building an emergency cash cushion, you may be able to avoid borrowing on high interest rate credit cards. Once your money market balance reaches your emergency cushion, you can diversify into other investments.
For other ways to get your savings plan on track, give us a call
. We can help you determine how much you need to accumulate for a specific purpose and help you set a course to achieve your goal