Creating a retirement plan can mean a world of difference later in your life. In order to be prepared for retirement, living comfortably without traditional income, you have to start early and make smart choices.
If you’ve been meaning to start planning for your retirement, but haven’t done it yet, there’s no better time than right now. Here are some tips to help you get started.
Start Saving Now
The best way to ensure that you save enough to retire and live comfortably, you have to start early. But even if you didn’t start the day you turned 21, it’s never too late to start putting money away now. The earlier you set up a 401(k), Roth IRA, or another kind of retirement savings, the longer your investments have to grow.
Consider How Much You Need
You need to figure out how much you’ll need when you retire. Right now, it might sound good to just save as much as possible, but without a clear goal, you may find yourself coming up short when it’s time to retire. Consider what age you’re trying to retire, which will affect how long you’ll need money, and also consider how much money you’ll need every month.
It involves more than just the cost of food and your electric bill. If you’re going to rent, you obviously need rent money, but if you’ll be living in a home that you’ve paid off, you also need money for repairs and upgrades. Save money for future medical costs, insurance, and money for a retirement home in case you need assisted living. Don’t forget about taxes, or the cost of inflation, as well.
Take Advantage of a 401(k)
If your employer offers a 401(k) plan that you are eligible for, you should definitely take advantage. It offers a significant advantage by allowing you to contribute pre-tax money. That means that you can invest more of your income, without it affecting your monthly take-home pay as much.
If your employer matches your 401(k) plan contributions, you should be contributing at least enough to take advantage of that. It’s pretty much like getting free money, and who doesn’t want free money?
While you’re contributing money to your 401(k), don’t touch it until you’re ready to retire! Taking money out, even if it’s just a little bit, can create a huge difference by the time you reach retirement age.
Buying and selling stocks as short-term investments might not be the best idea when trying to save money for retirement. Often times, you have a higher chance of losing money with short-term investments versus long-term investments. In order to really build your retirement fund with long-term investing, you have to be ready to stay committed to your stocks as the market dips and rises.
You can look into a growth stock mutual fund, which is a group of stocks that experts have analyzed and are expecting to increase in value. Mutual funds are also a good idea because you can invest in a variety of stocks, instead of risking all of your eggs in the same basket with single-stock investments.
Have a Diverse Portfolio
Keeping your portfolio diverse can help reduce the risk to your retirement funds. Invest in stocks, bonds, mutual funds, real estate, or any other kinds of investment options.
Review Your Retirement Plan
After you’ve made your retirement plan and have started contributing, you can’t just leave it as is forever. Your needs and wants may change over time, changing your retirement plan. It’s in your best interest to come back every so often and review it. Regularly review your investments, your goals, and your retirement plan as a whole, at least every two years.