Can You Save More? After taking care of your monthly expenses (including your contributions to your company retirement plan), do you have money left? If you do, do you have a few month's worth of savings in case of emergency? If the answer is yes, read on. If you don't, you may want to consider saving in an emergency fund first and then implementing the following suggestions.
You Should Save More If You Can. Income for your retirement years will probably come from a variety of sources: Social Security, income from investments, perhaps earnings from a part-time job and, of course, withdrawals from your retirement savings. No one source will be enough, however, so you may need to save as much as you can, in as many different ways as you can afford.
But What Should Come First? Of the above, the single best way to leverage your savings dollars is your company retirement plan. Why? Because these savings grow in a tax-deferred environment. The power of tax-deferred saving can be tremendous. If you're saving through a taxable investment, you may be subject to at least capital gains taxes, if not income taxes. That can amount to almost 33% of the money your investments earn! And even though you will have to pay taxes as you withdraw tax-deferred savings in retirement, the more money you can put into tax-deferred savings, the better off you will likely be.
This information is not intended to be a substitute for specific individual tax, legal or investment planning advice. Schwab does not provide tax or legal advice. Where specific advice is necessary or appropriate, please consult a qualified tax advisor, CPA, Financial Planner or Investment Manager.
