If you’re like many architects, you have strong discipline in how you work with your clients and manage your firm and career. Why not apply a similar discipline when it comes to saving for your future?
Considering client needs and budget along with building requirements, material choice and contractors require strong coordination skills and planning. It is often helpful to apply those same disciplines to your financial and retirement goals. Although it’s never too late to begin planning for your financial security, starting early can give you a real boost toward reaching your financial goals. If you want to keep the price of a comfortable retirement, a house, and perhaps a college education or two within your reach, the question is, can you afford to wait to start saving?
The key to saving is to think of it as another basic expense in your budget. Don’t look for savings in what’s left over after spending; often there isn’t any. Instead, make saving a habit. Treat your savings deposits like your rent payments, and put aside a set amount each month (or even each week). Automatic payroll deduction or automatic checking account transfers to your savings can aid this process. Over time, even small amounts can make a difference.
In addition, the longer you invest, the more you can potentially benefit from the power of compounding. Compounding occurs when any earnings from your investments are reinvested and potentially produce more earnings. It’s like a snowball effect: each year’s gains can build on past gains, potentially increasing the overall growth of your investment.
Invest for retirement
As an architect, one of the best ways to provide for your financial security is to establish an employer-sponsored retirement plan such as a 401(k) for your firm. Even solo owners, (one-person firms) can setup a 401(k). If you are an employee of a firm, university or municipal entity, you should take advantage of any 401(k), 403(b), or 457 plan that may be offered. These tax-advantaged plans allow you to make pre-tax contributions.
For example, if you make $4,000 a month and contribute $400 to your employer-sponsored retirement plan, the pre-tax contribution would reduce your taxes from $1,000 to $900 – thus saving you $100 in taxes so the contribution only “costs” you $300.Note that this example assumes a 25% tax bracket and is for illustrative purposes only. Additionally, taxes aren’t owed on any earnings until they’re withdrawn at retirement, when you may be in a lower tax bracket.
What’s more, Roth-style plans allow for after-tax contributions and tax-free withdrawals in retirement—when your tax bracket may be lower—provided certain eligibility requirements are met. Another big plus is direct contributions from each paycheck so you won’t miss the money, as well as a possible employer match on a portion of your contributions.
If a 401(k) or similar plan isn’t available to you, and remember a 401(k) is available to one-person firms, consider investing in an IRA. IRAs come in traditional and Roth varieties. Generally, contributions to and income earned on traditional IRAs are tax-deferred until retirement; Roth IRA contributions are made after taxes, but earnings thereon can be withdrawn tax free upon retirement. Note that certain eligibility requirements apply and nonqualified taxable withdrawals made before age 59½ are subject to a 10% penalty.
The AIA Trust is here to help
The AIA Trust offers retirement savings and distribution vehicles through AXA Equitable to assist you in achieving your retirement goals. Plans can be established for one-person firms—or for many employees—utilizing a variety of retirement savings and distribution vehicles. AXA Equitable can assist you in achieving your goals based on 50 years’ experience working with association members and over 25 years with AIA architects. AXA Equitable can help you review your options and offer you choices that will alleviate the burden of establishing and managing a retirement savings plan. It’s one of the ways that the AIA Trust makes it easier for you to focus on doing what you do best: architecture.
You may call 1-800-523-1125 to speak with a an AXA Retirement Program specialist or visit www.TheAIATrust.com/retirement-plans/ to learn how you can start saving today.