Whether you want to pursue a passion project, start your own business or just spend more time doing the things you love, retirement should be something to look forward to.
Instead of following hearsay advice, having set benchmarks and objectives may make it easier to reach your retirement goals. So, here’s a quick guide on what you can start doing right now, depending on your age.
It’s never too early to start saving for retirement. Why? Simple: the sooner you start saving, the more money you’ll accumulate. So, sign up for your employer-sponsored retirement plan as soon as you can. If your employer doesn’t offer a retirement plan, consider starting your own plan. Saving and investing apps can help you automatically save for your goals, short term and long term, without feeling the pinch.
As your career takes off, you’ll also start making more money. Try to maintain your lifestyle and use the extra influx of cash as an opportunity to save more. If you switch jobs, don’t forget to roll over your funds.
Setting money aside for retirement in your 20s will also help you earn the most in compound interest. Compound interest is the interest gained on the previous years’ interest gains. Your money basically multiplies itself.
You’ve accumulated a few years of work experience and your salary is starting to show it. This is the time to hone in on your retirement goals. Get in touch with a financial advisor. They can help you make sense of your finances and set a clear path for your goals.
Maximize your contributions to your employer-sponsored retirement plan, whether it’s a 401(k) or another type of retirement account. If you can’t contribute the maximum amount, try to step it up gradually. Even an increase of 1% can make a difference.
Focus on paying off debts, like student loans. The more debt you can erase, the more income you will free up to add to your savings.
At this point, hopefully you’re feeling the most comfortable you’ve been – financially – in your career. But just as you’ve entered a salary bracket that makes sense to you, you may also be feeling the pressure financially. Paying for your child’s college education and, in some cases, helping your own parents can put a strain on your finances during this decade.
This is also the time when retirement starts to feel real. It may be a good time to speak to an advisor and rethink your budget. Assess your needs and make sure you’re putting enough money away. Also, make sure you have a healthy emergency fund. This extra padding could help you avoid dipping into your retirement savings to pay for home or education expenses.
Retirement is just around the corner. Take advantage of the catch-up provisions that raise your contribution limits by $6,000 through your employer-sponsored plan. This applies to 401(k), 403(b) and 457(b) plans, allowing you to contribute up to $18,000 per year.
Now is a good time to speak to an advisor about making your exit plan. Your savings and investments may not be enough to fund the lifestyle you want throughout your retirement, so start planning for that. You can choose to delay retirement or consider a second career to earn more money. Turning a passion project into a side-gig can help you earn additional income in retirement. This also has an effect on your Social Security benefits, as they are based on your total earnings and the age you start collecting them.
Managing your retirement savings to last longer is a big step as you embark on this new life stage. Talk to an advisor to plan your retirement budget. You’ll need to account for a lower income during your retirement years. Also, read up on Medicare coverage and make a healthcare plan.
Take another look at your investments. It may be a good idea to move your money to a less risky portfolio in the hopes of protecting and preserving your funds for retirement.