If you’re a middle-aged American considering saving for retirement, there’s good news and bad news. The good news is that you still have an array of options that will give you a healthy fund for your retired life. The bad news is, if you’re no longer in your early 20s, then the contribution you need to make will be substantially larger. And yes, there are much more options than your 401(k) retirement fund or 403(b) fund. Here is a lowdown of the two options available for you to start today.
- Health Savings Account
If you’re one of those enrolled in a high-deductible health plan, it would be a good idea to max it out before you max out your 401(k) retirement fund. This is one of the most effective saving for retirement options, and your contributions here are all pre-tax with withdrawals qualified to be tax-free if they are legitimate health expenses. There are 2 reasons why HSA is a good tool for saving for retirement:Firstly, the money invested in a non-flexible HSA can stay put, and in some cases be invested, if you’re not planning to use the money available for the next couple of years. Therefore, once you retire, you can pay for all your health expenses from your HSA fund. Secondly, once you turn 65, you can use your HSA fund for any expense without having to pay any penalty whatsoever.
- Roth IRA
Meant explicitly for saving for retirement, you need to meet some income limits ($193,000 for married couple filing jointly and $132,000 for married people filing separately). The contributions are after-tax but the withdrawals are tax-free if your account has been operating for 5 years and you are 59 ½ years of age or over. As the money is penalty-free while withdrawing, it can be a great savings option for someone after they have met their 401(k) contributions. It is advisable to keep 3-6 months of salary in a savings account before making an aggressive push here.