Retirement planning is an activity we should never fail to do. The younger we are when we start the better, and planning for your retirement from an early age is the best way to go.
The problem is that many of us don’t bother planning for our retirement until we begin to see signs of old age, which may already be too late. Before your heart starts to palpitate at the thought of a bleak retirement, below are some top tips that may just spell the difference between enjoying cruises in the Bahamas and sitting in front of a television set in a nursing home watching reruns.
Top 7 Tips to Help You Retire in Style
The moment you start earning is also the moment you should begin planning for retirement. When it comes to investing, time is the most important factor. This could mean a difference of thousands of dollars in earned interest. This can be hard to understand for those who aren’t financially “literate,” but there’s a reason why this advice is being reiterated time and time again.
The best thing you can do to ensure a good retirement is to start early, even if you can only invest small amounts at a time in the beginning.
Evaluate your Retirement Needs
There’s a reason why it’s called retirement planning. This means that you’re supposed to know when you’re going to retire, how much you will need, where you’ll be retiring, and all those other basic questions. Have a clear picture of what kind of retirement you’d like to have and build your retirement plan around these basics. Having a clear idea of what you want gives you retirement goals, allowing you to plan more strategically in order to reach those goals.
Join in On Your Employer’s Retirement Plan
Employers often offer to match your contributions, which is just like having free money. There are several benefits to contributing to your employer’s 401k, such as having lower taxes and automatic deductions. Employers offer different perks on retirement plans so make sure to learn about it as much as you can. Find out how you can get the employer’s maximum contribution, and how many years of employment you need to work before you can access the money.
Invest in Other Vehicles Too
An employer’s 401k plan isn’t going to be enough to cover your retirement needs. This is also the same for Social Security. Instead of being content with the usual retirement offers, be proactive in learning about better investment vehicles. No matter how much you save or how long you’ve been saving, smart investors always outrun “hardworking” ones, simply because of the investment vehicles that they are using.
You can find many kinds of investments available such as stocks, bonds, mutual funds, rental property, REITs, and certificates of deposits (CDs), just to name a few. Diversifying can be a good move and don’t be afraid to place your money in “risky” investments when you’re still young. You can always move these investments to “safer” ones when you get older.
Keep Your Hands Off!
One of the worst things you can do with your retirement money is to use it when you’re not supposed to use it! Resist the urge to withdraw your retirement money and don’t think about “loaning” it either. Even if you pay it back in a couple of years, you’re wasting precious interest that your money could be earning. Aside from that, you can also lose your tax benefits, and you may have to pay penalties for early withdrawal. There are too many disadvantages in getting a slice of a pie that is only half baked.
Contribute to a Roth IRA
It is currently being debated that a Roth IRA is much better than a traditional 401k. But why choose one when you can have both? IRAs are an easy way to save, you can even set it up in such a way where the money will be automatically debited from your savings or checking account and transferred directly to your IRA account. In this way, even those who have little discipline don’t have a choice but to save.
Planning for your retirement should be something that you actively do. Don’t just take your employer’s retirement plan for granted and don’t immediately believe you’re going to have enough money after you’ve made a couple of investments. Read about the options you can choose from, the tax benefits and deductions you can have, and have a chat with your employer, financial adviser, and/or bank. They may have some crucial information that can beef up your retirement plans.
Retirement planning isn’t something that should be taken lightly. Just like planning for your first (and subsequent) children, your kid’s college days, and the purchase of your first home, your retirement is an event that should be given ample thought.
What have you done to start saving for your retirement?