Use Automatic Savings Programs to Reach Your Financial Goals
Automatically transferring money to a savings account or retirement fund can be a simple way to save
One of the simplest and most effective tools you can use for almost any saving goal is an automatic savings plan. Automatic saving programs generally come in two forms: either your employer deducts a certain amount from each paycheck and deposits it into a specific account, or your financial institution moves a certain amount from your checking account into a savings account on a regular basis. Either way, these automatic transfers add discipline to your savings goal. Once people use them, they often find they do not even notice the smaller amount they have to spend each month.
Putting automatic savings plans to work
- Fund your IRA contribution. The contribution limit for 2018 is $5,500 for both regular and Roth IRAs ($6,500 if you are age 50 or greater). To contribute the maximum, decide which type of IRA you want to fund, open the IRA account and then have $458 ($542 if you qualify for the extra $1,000 contribution) automatically transferred each month into the IRA account. If you can’t afford that much, put in what you can.
- Fund an even larger amount for your retirement. If you are already taking advantage of your employer's retirement plan and an IRA, you can transfer even more into a savings account each month. When the balance reaches a certain level, transfer the funds into a Certificate of Deposit to earn higher rates.
- Save for your children's college educations. Determine the amount you want to set aside for each child, establish a custodial account for the child and have that amount transferred each month.
- Combine an automatic savings plan with a Section 529 college savings plan. This is similar to transferring the funds into a custodial account, but with the added benefit that earnings within a Section 529 plan are tax-deferred and can be withdrawn tax-free if used for qualified educational expenses. For information on Nevada’s 529 plan, visit the Nevada State Treasurer’s website. As always contact a tax advisor for more information.
The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank, a division of Zions Bancorporation, N.A. Member FDIC