Are you worried about Social Security? 2 Roth IRA to be created in 2024

It’s no secret that Social Security is in trouble.

The Social Security Trust Fund is expected to be depleted within the next 10 years, which is surprising. However, you don’t have to worry about your benefits disappearing completely as you will still receive around 77% of the benefits you were promised, according to a recent trustee’s report.

But no matter what the future holds for Social Security or how many years you have until retirement, it’s never too early to explore your retirement savings options. For example, a Roth IRA can provide tax-free retirement income that can supplement your Social Security benefits.

If you’re ready to get started, I’ve listed two Roth IRA moves you should consider right now so you don’t have to rely solely on Social Security.

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1. Contribute as much as you can to a Roth IRA

Roth IRA (Individual retirement account) It’s one of the most coveted retirement savings accounts. You can deposit after-tax money into your account today in exchange for tax-free money when you retire.

Let’s say you’re building a six-figure nest egg. After you turn 59 1/2 and meet the requirements of the five-year rule, you can withdraw all funds from a Roth IRA 100% tax-free. Additionally, distributions from a Roth IRA do not affect your Social Security benefits.

In 2024, retirement savers with sufficient earned income can contribute up to $7,000 (or $8,000 if they are 50 or older) to a Roth IRA. However, keep in mind that if your modified adjusted gross income (MAGI) exceeds the 2024 limit, your maximum allowable contribution may be reduced or “phased out.”

So, if you’re eligible to contribute money to a Roth IRA in 2024, you can aim for the maximum contribution amount this year. Here are some tips for boosting your Roth IRA contributions:

• Create a budget so you can plan for your money.
• Track your spending.
• Get rid of unnecessary expenses.
• Let extra income or bonuses flow into your account.
• Set up recurring contributions from your checks to your Roth IRA.

You’ll need to contribute money to your 2024 Roth IRA by April 15, 2025, so you have time to get your finances in order. But you don’t want to wait too long to contribute. The sooner you reach your Roth IRA contribution goal, the sooner you can start investing money in the account and reach your other retirement savings goals.

2. Invest your Roth IRA contributions

Maxing out your Roth IRA can be an important retirement milestone, but you can’t stop there. To grow your Roth IRA balance over time and create another source of income during retirement, you’ll need to invest those funds in your account.

If you don’t want to rely solely on Social Security benefits, dividend income investing may be a good option. Dividends allow you to earn additional income each month or quarter as long as the company continues to declare dividends. Income from a Roth IRA can help pay some bills during retirement. But to make this a success, you’ll need to invest money in the account and look into reinvesting dividends to give your portfolio a chance to grow faster.

Let’s say a company declares a quarterly dividend of $1 per share. If a company pays dividends quarterly and you own 1,000 shares, you can expect to receive $1,000 worth of dividend income from your Roth IRA every three months. When you reinvest your dividends, you automatically receive more shares of the company’s stock as dividend income. Now your dividend income can help you generate more dividend income in your portfolio. If you need to use that money during retirement, you can stop reinvesting dividends and withdraw the funds as needed. As long as you hold dividend shares in the company, you will continue to receive dividend income when the board of directors declares it.

Although your Social Security benefits will not disappear completely, it is difficult to predict exactly how much you will receive in the future. By looking at other retirement savings options, like a Roth IRA, you can protect yourself from the risks of relying solely on Social Security benefits. Knowing that no matter what happens, you’ll have an additional, tax-free source of income during retirement can make future planning a little sweeter.