Life has a way of being unpredictable. When it comes to financial matters, factors like the state of your health, your employment status, and natural calamities can all play a role in your financial state. Planning for your retirement by investing wisely shelters your golden years. You are able to do this when you have a steady means of income. While starting to save for retirement in your 20s is best, you can get into the saving wagon as soon as you have an income. Here are 4 tips for saving money for retirement that will put you in a better position for your latter years.
1. The Early Bird Catches the Worm
So says the old adage; in this case meaning that you need to start early in order to make the most of your savings. Ideally starting to save in your 20s lessens the amount you have to set apart to your savings per month. This is in comparison to starting to save in your mid 30s to 40s. Beginning to save in your 40s would mean saving twice as much money every month in order to end up with roughly the same amount of retirement benefits at the end of your work life. The beauty of starting to save early is you gain from your savings through compound interest. This allows your savings to accrue interest the longer they stay.
2. Seek Wise Counsel
Before taking too many steps on you should invest some money and time in Certified Financial Planners (CFPs). These are financial experts who have specialized in different aspects of investment. Finding one who is well versed in retirement planning will help you know the right places to save your retirement stash as well as the right investments to take. A good place to find such a professional to give you tips for saving money for retirement is the Financial Planning Association.
3. Put Your Eggs in Different Baskets
Ideally, when you are saving for your retirement, it is in your best interest to use the resources available to you. There are two concrete plans you could use to your benefit. These are the 401(k) plan as well as the IRA plan. The 401(k) plan is an employer sponsored package. When you save 6% or more of your income, you are able to have matching funds saved by your employer on your behalf. You have the option of pretax or post-tax deductions. The advantage of pretax deduction is your savings will be as is while the advantage of post-tax deductions is you are able to gain interest on all your savings. Remember, though, that you may have loose a substantial amount of your savings to taxes if you withdraw unwisely. This is where financial counsel comes in to guide you.
The IRA plan is the Individual Retirement Account. This type of account safeguards your savings more from tax deductions. There are 3 kinds of this plan namely: Traditional, Roth and Rollover. A Traditional IRA account allows you to save your retirement and have it taxed upon retirement while a Roth IRA account keeps your already taxed savings. The Rollover account is basically a Traditional account that takes in savings from a recognized retirement plan like the 401(k) plan.
4. Invest Wisely
If you can, save in both the employer-sponsored retirement plan as well as your individual account. You can be able to have the financial power to do this when you keep your expenditure on a low. Limiting your eating out and other pleasantries will help you plan for your retirement. Investing wisely between stocks and bonds will give you a good return as well, given a long term investment of about 20 years. These tips for saving money for retirement will get you started in the right direction of planning for your future.