How to invest for retirement

Understand the basics of retirement accounts

Different accounts offer unique tax advantages that suit various goals:

• Pre-tax 401(k)/403(b)s and IRAs: Contributions are pre-tax, lowering your taxable income now. However, withdrawals in retirement are taxed as ordinary income.
• Roth IRAs and Roth 401(k)/403(b)s: Contributions use after-tax dollars, but withdrawals in retirement are tax-free, which can be helpful if you expect higher taxes later.
• Health Savings Accounts (HSAs): These accounts offer triple tax benefits—tax-deductible contributions, tax-free growth and tax-free withdrawals for medical expenses. After age 65, they can also be used like a traditional IRA for other expenses.

Maintaining a balance of pre-tax and after-tax investment accounts along with your taxable accounts can help you manage your tax exposure and give you flexibility to optimize your after tax returns as you eventually make withdrawals.

Best retirement investments: Where to begin

Wondering how to invest money for retirement? It depends on your age and financial situation. Younger savers might focus on stocks for long-term growth. Closer to retirement, adding bonds or other conservative investments can reduce risk.

For those in their 20s, 30s and 40s who have many years till retirement, the focus should be on saving and growth. With time on your side, you can benefit from compounding returns and don’t have to worry as much about volatility in your portfolio.

For those nearing retirement, focus on protecting what you’ve saved while still generating income. Strategies include:

• Allocating more to low-risk assets to avoid losses when it comes time to withdraw.
• Using annuities or dividend-paying stocks for steady income.
• Taking advantage of catch-up contributions for 401(k)s and IRAs to supplement your savings.

Strategies for getting the most out of your retirement investments

Here are some actions you can take to make the most of your money as you save and invest towards your retirement:

• Maximize contributions and employer benefits: Employer-sponsored plans like 401(k)s often include matching contributions—essentially free money. Make sure to contribute enough to get the full match. For IRAs, staying within annual contribution limits ensures you’re taking full advantage of tax benefits.
• Build a diversified investment strategy: Diversification is key to successful retirement investing. Spread your investments across stocks, bonds and mutual funds to balance risk and reward. As retirement nears, shifting toward more conservative investments can help protect your savings from market swings. Rebalancing your portfolio regularly ensures it stays aligned with your goals.
• Consider taxes as you plan withdrawals: A smart withdrawal plan can reduce your tax burden in retirement:
  • Withdraw from Roth accounts during high-income years for tax-free income.
  • Use pre-tax accounts in lower-income years to minimize taxes and fill up low tax brackets.
  • Use taxable accounts together with pre-tax accounts to take advantage of (lower) capital gains tax rates.
    
    This approach can make your money last longer while keeping taxes manageable.
• Use HSAs for healthcare costs: Healthcare is a major retirement expense, and HSAs can help cover it efficiently:
  • Contributions lower your taxable income.
  • Growth is tax-free, boosting your savings.
  • Withdrawals for qualified medical expenses aren’t taxed, preserving other assets.
    
    Even if you’re healthy, HSAs are a versatile tool for retirement planning.
• Stay informed about rules and limits: Contribution limits and rules for required minimum distributions (RMDs) often change. For example, the RMD age recently increased to 73, giving your savings more time to grow tax-deferred. Staying updated helps you adapt your strategy and avoid penalties.
• Consult a financial advisor: Planning for retirement can feel complex, but Associated Bank can guide you through the process. We can tailor strategies to your needs, optimize your portfolio and help you project future income.

Align your investments with your goals

Retirement planning isn’t just about money—it’s about your vision for the future. Whether you dream of traveling, spending time with family, or simply enjoying financial peace, clear goals will guide your decisions and keep you focused.

By understanding and using the benefits of 401(k)s, IRAs, Roth accounts, and HSAs, you can create a strong financial foundation for your retirement. The choices you make now will shape your future, so start planning today.

Learn more about planning for your retirement. Find a team near you.