The nursing profession is fraught with challenges on every front—from high-interest student loans and taxing mandatory overtimes to ensuring patient satisfaction and preventing on the job hazards. All these factors make future savings for a nurse all the more essential because Medicare and social security may not be adequate to cover you through retirement.
If you were in a perfect world, you would be saving a significant chunk of your paycheck in a retirement account, but if your existing financial situation is at odds with your basic necessities, here are 10 tips to help you start saving.
1. Start Early, Save Big
Whether you have just started your nursing career or you are half-way through, it is never too early to commit some amount from every paycheck. You can raise the bar with every hike you receive. Save as much as you can because social security may not be enough.
2. Prioritize Your Retirement Savings
If you start saving at the age of 22 by putting in 10% of your compensation which is $40,000 with a matching contribution of 3% from your employer, your nest egg is likely to give you a sizeable return of $1.7 million when you retire. Waiting any longer will only work to bring down your returns, so in your twenties is the right time to start.
3. Don’t Rely on the Government
While government policies and programs may aid your medical expenses to a certain extent, you cannot count on them, as a single medical emergency in the family is enough to deplete your lifetime of savings. Evaluate all your income sources and know your retirement options to build a portfolio that lasts you through your retirement years.
4. Take Advantage of the Employer’s Match
Be sure to contribute to a retirement account if your employer is making a matching contribution. This will boost your retirement reserve, so make the most of it as you would not want to miss out on free money being added to your savings.
5. Invest in a 401(k) or 403(b) and Reduce Your Taxable Income
If you fall in the 25% tax bracket, your 401(k) contributions will reduce your taxable earnings and help you save $25 for every $100 you contribute. This will boost your retirement account by 100% but your earnings will only decrease by 75%.
6. Explore Roth IRAs
Unlike a traditional IRA where you are taxed on withdrawal, a Roth IRA does not give you a tax break but allows you to enjoy a tax-free retirement. It makes a great option for young savers.
7. Don’t Cash Out; Come What May!
Retirement accounts were created to help you cope with the adversities of old age, so keep your reserve intact till you turn 59.5. An early withdrawal can invite a 10% penalty over and above the federal and state taxes. Once you have invested, just let it grow.
8. Diversify Your Financial Portfolio
If you are too conservative with your investments, the returns may not be adequate to keep up with the cost of living by the time you retire. If you have a long time to retire, consider investing in stocks, bonds, no-load mutual funds, and exchange-traded funds. A diversified portfolio makes a smart move when saving for retirement.
9. Create a Sound Withdrawal Strategy
You can consult a financial advisor when designing your financial portfolio. This will help you evaluate all the income sources that can nurture your nursing retirement and last you longer. Creating a sound withdrawal strategy will help save taxes and avoid penalties.
10. Know If You Qualify For the Saver’s Credit
If you belong to the moderate-income bracket, you may be eligible for a special tax break. This credit is given over and above other tax benefits on retirement savings to low-income taxpayers. A saver’s credit can be claimed if you are contributing to a 401(k) or 403(b) plan, SIMPLE IRA, or a SEP IRA.
If you haven’t started as yet, don’t delay any further. Just do it!
Whether your savings are meager or substantial, it is important to get started and take smarter decisions. Take professional help if needed and create a plan that considers income taxes and your buying power. Don’t let your busy schedule or unpreparedness keep you from building your nest egg. Once you start saving, funds will accumulate and your nest egg will continue to grow even before you know.