It’s never too early to begin planning for retirement. No matter your age, preparing early means a more comfortable retirement period. Not to mention better money practices throughout life will protect you from some of the most consequential financial blunders. With the average American spending 20 years living in retirement, it’s essential you make the most of your financial opportunities now to ensure your happiness and monetary safety in the future.
Plan a Budget
You’ll need to have a pretty clear image of the kind of income you’ll need during retirement to start determining the right amount for your nest egg. If you want to find a general ballpark figure, use a retirement planning tool like the one found at American Funds to discover what your numbers will look like. It will take into account things like the age you hope to retire, household income, rates of return and other important factors.
If your employer matches your contributions to a 401k, then you need to ensure you’re making the most of this opportunity. It’s free money so make sure you contribute as much as safely possible to ensure you getting the best return possible. Tax deferrals and compound interest will add up to huge amounts of money you wouldn’t have seen otherwise.
Consider an IRA
If you haven’t yet considered opening an Individual Retirement Account, consider your options. Traditional IRAs are sometimes tax deductible, and your earnings have the potential to grow tax-deferred until the point at which you can make withdrawals. There are also Roth IRAs that have their benefits. If you’ve had one for at least five years by the time of retirement, all of your after-tax contributions can be withdrawn federally tax-free. There are yearly limitations on the amount and size of contributions allowed, so it’s best if you start putting money into one of these accounts as soon as possible. After turning 50, you’re able to increase the amount you contribute, meaning you’ll leave the work force with a much bigger nest egg than you might have expected otherwise. IRAs are a good choice because they give you more flexibility in terms of investment choices, like real estate, municipal bonds, and commodities. IRA contributions can be automatically deducted, meaning you won’t have to think about. You can also choose to contribute amounts that won’t be highly noticeable, meaning you’ll be putting money away but not “suffering” in the meantime.
Delay Your Social Security Benefits
The longer you can put off accepting a social security check, the more you’re going to receive when you finally do. You can start receive social security benefits at age 62, and at any point thereafter until 70. For each month that you hold off on these benefits, the more your monthly benefit will increase meaning additional income.
Save and Don’t Touch
It’s essential that you save, save, and save some more. What’s more important is that you never touch those savings until that wonderful day of retirement comes. If you’re not already saving, it’s time to jump on this essential bandwagon, and if you are, try and increase your savings bit by bit. By making saving a priority, you’ll fall into better habits and better pad yourself against the risk of after-retirement debt. If you are using something like an IRA, you can also be penalized with heavy tax charges if you withdraw your money too early.
If in Debt
Financial experts recommend that those contemplating retirement in the next few years do everything in their power to be debt-free by the time they leave the work force. If you’re in debt and waiting to take the retirement plunge until after you’ve paid off your accounts, you may need to take more aggressive measures to ensure you’re not working until you’re 80. Use a tax company like Community Tax to help you plan out how to quickly and efficiently get rid of any debt owed so you can enter the after-workforce life without being shackled to high-interest accounts.
If you’re looking to make the most of your retirement planning, incorporate these tips and tricks into your efforts. Consider using the help of financial advisors if you’re unsure which courses of action to take, and give yourself peace of mind in the years before retirement day comes.
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