By Pam Reiss
In Part 1 of this series, it was revealed thanks to a recent Gallup poll that a majority of Americans report that they prefer saving their money over spending it. 59 percent of Americans claim to be savers, while 8 in 10 report that they monitor their finances closely. Yet, a large majority of Americans have less than $1,000 in their savings accounts.
Clearly, there is a discrepancy between how much we think we save and how much we actually do. In order to realign our intentions with our actual saving practices, it is important to take time and develop an honest and thorough saving strategy.
In Part 2, we covered some of the important steps you must take to develop your saving strategy. These included: setting savings benchmarks, calculating your net worth and creating a budget.
In Part 3, we will take a closer look at some of the investment vehicles available from Milford Bank. By blending various types of investments, you can customize a saving strategy that suits your budget and your needs.
Here are just a few ways that you can boost your savings.
Certificates of Deposits: CDs are optimal for short- to medium-term savings goals. CDs earn a slightly higher interest rate than a standard savings account, and won’t require a significant investment. While your money will be untouchable for the duration of the term you select, you can stagger them at various intervals to make sure you always have liquidity.
Individual Retirement Accounts: Also known as an IRA, this is one of the most popular investments for individuals that are putting their savings towards retirement. When you contribute to a traditional IRA, you’ll get a tax deduction for the year, providing you a little bit more financial flexibility while you’re young, without sacrificing your savings. Income taken after you turn 59 ½ are taxed at ordinary income tax rates, but since you’ll be out of the labor force, your income may be taxed at a lower rate than it would if you took the hit during your prime working years.
Permanent Life Insurance: While the common perception is that life insurance is only in place to provide for families in the event of an untimely death, permanent life insurance distinguishes itself with a saving element. Permanent life insurance offers coverage for life, but it also builds tax-deferred cash value when you pay your premiums. If you need a life insurance policy and don’t want to sacrifice your savings strategy, permanent life insurance may help with both.
Tax Deferred Annuities: An annuity is another form of insurance contract. If you’ve already maxed out your yearly contributions for an IRA or 401(k) account, annuities allow you to continue saving. You won’t be taxed on your contribution, made like an insurance premium payment, until you begin taking money back out upon your retirement date.
To get started building a robust and diverse investment portfolio to maximize your saving strategy, stop by any office of The Milford Bank today. You can also learn more and see other helpful resources at our Online Learning Center.