Not everyone wants to retire someday, and unfortunately, some who want to aren't financially able to do so. If you don't see retirement as a part of your future, saving for it probably isn't high on your priority list. But it's still a good idea if you can afford it. Below, we'll look at some key ways that saving for retirement can help you even if you don't plan to retire.
Retirement isn't always a choice
In a perfect world, everyone could work as long as they'd like and retire of their own free will. But too often, injury, illness, family caretaking requirements, and job loss interrupt plans to continue working. In some cases, it might be possible to find a new job, transition to part-time, or work remotely rather than going into a workplace. But others may have no choice but to retire.
If you have no savings, you'll have to rely on government benefits like Social Security and Supplemental Security Insurance (SSI) and support from family members. This may not give you a comfortable lifestyle, and it could put added financial strain on those who have to support you.
But if you have some savings of your own, you can use this money to supplement your government benefits. Even if you aren't able to cover all your retirement costs, you'll at least reduce the amount of assistance you need from others.
Savings can still do you some good even if you continue to work
Your retirement savings can function as an additional emergency fund if you are able to continue to work as long as you'd like. You can dip into this as needed to help you cover unplanned expenses, or even to treat yourself once in a while.
And if you decide you don't need the money you've saved, you can always leave it as a gift for your heirs. This can help them improve their financial situation so they can achieve some of their long-term goals.
Saving could earn you a tax break today
You can reduce your taxable income this year if you make a contribution to a tax-deferred retirement account. These include traditional IRAs and 401(k)s, as well as many self-employed retirement accounts.
The amount of your tax deduction depends on the amount of your contribution. If you earn $50,000 and put $5,000 in a traditional IRA, the government only taxes you on the remaining $45,000 this year. It's sometimes possible to knock yourself down a tax bracket by doing this.
But be careful not to exceed the annual contribution limits for your account. You may contribute up to $6,000 to an IRA in 2022, or $7,000 if you're 50 or older ($6,500 and $7,500, respectively, for 2023). And you can contribute up to $19,500 to a 401(k), or $26,000 if you're 50 or older ($22,500 and $30,000, respectively, in 2023).
You should also note that the IRS forces you to make mandatory annual withdrawals, known as required minimum distributions (RMDs), from tax-deferred retirement accounts beginning in the year you turn 72. However, you can avoid these withdrawals from your workplace retirement account if you're still working and don't own more than 5% of the company you work for.
Whatever you do, you don't want to skip RMDs. Then, you'll pay a 50% penalty on the amount you should have withdrawn on top of taxes. But there's no rule saying you have to spend the money. You just need to take it out of your account and pay the government its share of taxes.
Do the best you can
It may not be easy for you to spare any extra cash, but even if you can save a few dollars here and there, that's a start. Put that money in a retirement account where it can remain invested and grow over time. Whether you retire or not, chances are you'll find a way to put that money to good use in the future.
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