More and more Americans are living a longer more fulfilling life, which is great news. But longer life spans equal greater retirement needs, so what is the best way to plan for retirement? Below are five simple strategies that allow you to build a long-term retirement savings plan.
Start early, the sooner you start saving, the more time you have for your money to gain interest essentially more time for your money to grow. First devise a retirement savings plan and stick to it. When it comes to retirement you want to invest for the long-term. There is no need for quick returns, slow and steady wins the retirement race.
Retirement is expensive, how much will you need to live comfortably? More and more individuals are living a longer more active lifestyle . Experts believe that you will need at least 70% of your pre-retirement income to maintain your everyday lifestyle once you stop working. Make sure you also take into account the amount of time you will spend in retirement, or if you will need to make a big purchase such as a home. Relocation may play a part in ones decision to purchase a home. For more information check out Penny Mac’s take on how to buy a home in retirement
If your employer offers a tax-sheltered retirement savings plans, contribute as much as you can. By contributing to an employee sponsored 401(k) program you will be able to take advantage of their matching benefits. Many companies will match your savings (up to a certain percent), basically providing you with retirement savings boost. Over time the compounding interest adds up, making a significant difference in your retirement savings. Secondly make sure you roll over your retirement savings when switching jobs.
Ones personal savings is also a big contributor to retirement income. One of the simplest ways to build up a personal retirement savings is to open a IRA You can contribute, tax-free, up to $5,500 a year into an IRA, or $6,500 a year if you’re over age 50. Unsure what exactly an IRA is or which what type is right for you? Here is a quick overview of IRA options.
Contributions for both a 401(k) and IRA are tax deferred, meaning your contributions are tax-deductible. By maxing out your contributions you are not only growing your retirement savings but also lowering your yearly tax costs.
It may be difficult to build up enough retirement savings if you’re not also using investments to grow your wealth. By actively investing you will be able to reach your retirement goals based on your needs. If you are late to the retirement savings game this may be a great option for you. Unsure where to begin when it comes to investing? Checkout our top books for beginning investors.
Once you have your plan in place, monitor your contributions and growth. Annually examine your retirement goals and any major events that may require adjustment to your savings plan. Continue to save regardless of life events.
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