When it comes to retirement, starting early is your safest bet. But even if you’re just beginning, you can inherently do better as time goes on. Read on to find out how you can boost your retirement savings today.
1. Set A Goal
First point in planning towards the future is setting a benchmark or goal which you would want to achieve. This means you need to determine at what age you want to retire, and how much money you need to save and invest to cater for your retirement including vacations, medical expenses, where you’re going to live, etc.
2. Focus On Starting Today
If you want to retire at age 62, then it’s expected to start saving towards it at age 25 and put behind 15% of your income, according to the Center for Retirement Research at Boston College. And since retirement goals differ from person to person, sso the earlier you can get started, the better off you’ll be.
3. Open A Retirement Account.
Once you’ve determined your retirement goals and how much you need to be saving to get there, it’s time to open a retirement account. Retirement savings, in order not to lose its value as a result of inflation, it’s advisable to invest in special securities and funds meant for retirement savings since they come with seasoned tax benefits. In general, there are two main types of retirement accounts: employer-sponsored retirement accounts, like 401(k)s, and individual retirement accounts (IRAs). Both accounts are available in traditional and Roth varieties and they offer tax-advantaged growth of your investment money, but you pick whether you’d prefer an income tax break now or in retirement.
4. Choose Your Investments
Growing your money so it doesn’t lose value should be a top priority. Therefore mutual funds, index funds and exchange-traded funds (ETFs) are generally considered good investments for long-term retirement savings. Index funds offer instant diversification in hundreds or thousands of stocks and bonds and they’ve regularly outperformed actively managed mutual funds run by professional investors. Though you need to assess your risk tolerance level to identify which of the asset classes you can invest in without always looking backwards. There are professionals who assist people in deciding what their investments will be. Get in touch with one and understand what your best course of action should be.
5. Automate Your Savings
Make your retirement contributions automatic each month and you’ll have the opportunity to potentially grow your nest egg without having to think about it. You can set up a regular cadence of deposits into your retirement accounts, whether that’s through a workplace 401(k) or in an IRA.
6. Audit Your Retirement Account Fees Every Year
Do you know all of the fees associated with your 401(k) account? A fee increase of just 1% to 1.5% could amount to thousands of dollars over the course of a couple of years, so do an audit to make sure you’re not paying too much in fees.
7. Don’t Make Early Retirement Account Withdrawals
Generally, people who withdraw from their IRA before age 59 1/2 are subject to a 10% tax penalty fee, as well as a tax on the income. However, there are many ways to avoid withdrawal penalty fees including shopping around for low-cost funds, read your 401(k) fee disclosure statement, do not leave a job before you vest in the 401(k) plan, directly roll over your 401(k) to a new account, ask for better investment options, find a fiduciary, and so on.
8. Consolidate Your Multiple IRAs
If you have a bunch of IRAs floating around, consider consolidating them into one easy-to-manage account to save money on costs. For example, you might be able to save money on trading fees and fund expenses.
9. Delay Social Security Payments For As Long As You Can
If you wait until your full retirement age, typically around age 66 or 67, you’ll receive 100% of your Social Security benefits. If you delay your retirement beyond your full retirement age, your benefits will increase by a certain percentage until you reach 70.
10. Don’t Forget To Factor In Inflation
Today’s cost of goods and services will most likely not be the same when you retire. When you think about how much money you need to retire, make sure to adjust your estimated living expenses for inflation.
The best way you can prepare for the future is to plan for it. I hope this guide has helped you to understand the simple ways you can start and maximize your retirement savings.