The idea of saving for retirement may be a given, but there are always retirement planning strategies that strive to increase account balance in your 401(k) or IRA when it is all said and done. Here are 7 tips to help you save toward retirement and build your nest egg even more:
–Make it a goal to save another 1%. With the magic of compounding interest, a small savings increase can add up if given enough time to compound. For example, if you earn $500,000 per year, and save 1 percent more (that $42 per month) and earn 6 percent on annual returns, you will have an extra $57,517 after 35 years.
–Where you live affects what you’ll save. Where you live will have a significant impact on your budget. So take housing into consideration when you are planning a budget as it is one of the biggest expenses you undertake. On the same token, don’t be penny wise and pound foolish: A newer townhouse might cost more up front but save you in repairs in the long run. Older homes have charm but bear in mind the costs for remodeling the major areas like the kitchen or bath can add up and sometimes get out of hand.
–Set financial goals with your advisor. Talk to your advisor to determine what capital amount you need to reach over a determined time period. A structure like this helps you focus on your strategy, and the level of risk you are able to tolerate to pursue your wealth accumulation goals.
–Utilize a 401(K) match. If your employer offers a retirement plan, contribute as much as you can to take advantage of matching contributions. And if you ever decide to leave, make sure you’re vested in the plan so you can take those employer contributions with you.
–Take a long-term approach.
Mitigating risks around a wealth accumulation strategy takes time and the realistic expectation is that you aren’t going to get rich at a young age. Taking risks is more about speculation, not risk mitigation, and the latter is how you’ll build your retirement to realistic expectations.
–Watch advisor fees. Lower advisor fees mean you’ll get to keep more of your money, but the bottom line is that no matter how an advisor charges fees, complete transparency is the base of any good investment advisor. The preferred compensation should be whichever is best for your particular situation.
–Avoid early withdrawal penalties. The government wants you to keep your money in a retirement plan, so if you withdraw money from your retirement account before age 59 ½ you will get hit with an early withdrawal penalty of 10% — on top of the amount you’ll get taxed. If possible, begin retirement account withdrawals after age 70 ½ to avoid another penalty.
There are many ways to save for retirement that you thank yourself for doing once you actually retire. Talk to your financial advisor or call Mooney Lyons at 1.847.382.2600 to find out how you can build your retirement savings and manage risk so you have the ability to save for retirement comfortably.
Brandon, Emily. 10 Painless Ways to Save More for Retirement. U.S. News and World Report Money. 15, Dec. 2015.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
The examples presented are hypothetical and are not representative of any specific situation. Your results will vary. The hypothetical rates of return used do not reflect the deduction of fees and charges inherent to investing.