1 No-Brainer Retirement Savings Move That You'll Thank Yourself for Later

The median retirement savings balance among Americans aged 65 to 74 is $200,000, according to the Federal Reserve. But ideally, you'll kick off your retirement with a larger nest egg than that.

In fact, steadily funding a retirement plan and investing aggressively in stocks could lead to a nice-sized balance. A $300 monthly contribution over 40 years at an average annual 8% return, for example, leaves you with roughly $933,000. And that 8% return is a reasonable one given that it's just a touch below the stock market's average.

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But there's one thing you ought to do on top of making regular contributions to your IRA or 401(k). And it's a decision that might pay off big time in the long run.

Set yourself up with tax-free income

A traditional retirement plan gives you the benefit of tax-free contributions, which is hard to pass up. But for more flexibility in retirement, put at least some of your savings into a Roth account.

Many seniors worry about managing their money once they're no longer earning an income. Not having to pay taxes on a portion of your nest egg could therefore be huge.

Take the stress of future tax changes out of the equation

Another reason to keep some of your long-term savings in a Roth account? You're effectively locking in your current tax rate on that money.

Say you're currently subject to a 22% tax rate based on your income. We don't know what tax rates will look like 10, 20, or 30 years down the line. But if they increase, any taxable withdrawals from your retirement savings will cost you more down the line. With a Roth IRA or 401(k), higher tax rates won't be your problem in retirement, at least not within the context of that portion of your savings.

You don't necessarily have to stick to a Roth savings plan only in the course of building your nest egg. But do try to keep a decent chunk of your retirement money in a Roth account to minimize your financial stress down the line.

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