With busy schedules, long work weeks, and a million other concerns in life, saving for retirement is one of the lowest day-to-day priorities. So much so that nearly one-third of Americans have nothing saved for retirement. Let us show you how to save for retirement, so that you don’t have to worry about it.These five tips below will help you get started and stay on track to plan for this important chapter in your life.
1) Don’t Wait, Start Early
Due to the Law of Compounding, the earlier you start saving for retirement, the better chance you’ll have of reaching your financial goals. As soon as you can, start putting some money away at a minimum each month–even if it is $20. This will help you avoid income shortfalls at retirement and will help you live the kind of retirement you want to live. This is also an opportune time to identify what your ideal retirement life will look like and what it will take to get there so you can start working towards it early.
2) Stay the Course
Staying consistent with your saving is the key to making sure you’re protected in retirement. Set a goal to put anywhere from 7%-10% of your monthly income towards your retirement savings. Make sure you’re holding yourself accountable by saving money often and building escalators into your savings plan so you can increase your savings amount over time. For example, every time you get a raise, increase your contributions by 1%.
3) Utilize Your Company’s 401(k), 403(b) or 457 Plan
If your company offers an employer sponsored retirement plan, take full advantage of it. Under this retirement savings vehicle, a portion of your paycheck is automatically deducted and invested into your available investment selections. Many of these employer sponsored retirement plans include an employer match, which will match your contributions as an additional benefit for being an employee of the company. If your company does offer a match, it is in your best interest to contribute at a minimum the same percentage as the match so you can increase your saving efforts.
4) Open an IRA
You should consider opening an individual retirement account (or IRA) if you don’t have access to an employer sponsored retirement plan such as a 401(k). When opening an IRA you will generally have 3 choices: a Traditional IRA, a Roth IRA or a Rollover IRA. These accounts provide an easy way to save for retirement with very little effort on your behalf. Many people use the the Traditional IRA as a way to lower taxes through making tax-deductible contributions. However, if you are participating in an employer sponsored plan you may not qualify for the tax benefit of a Traditional IRA. Roth Iras are becoming a more popular vehicle for retirement savings because contributions made to Roths are post-tax and allow your contributions and growth to be withdrawn during retirement tax-free if all requirements are met. Rollover IRAs are used when you have a 401(k) or 403(b) you would like to roll out of your employer plan.This can only be done after you leave a company or are no longer eligible to participate in the plan.
With so many choices, we recommend that you consult your tax advisor to see which IRA option is best for you. If you don’t have a tax advisor, you can consult one of our professional tax advisors now for free.
5) Consult an Advisor
It is always a good idea to seek professional advice when saving for retirement. You can do a lot of the research yourself using the internet, but consulting a professional will ensure the information you gather is relevant to your savings plan. However, if you want to reach your retirement finish line as fast as possible, it is probably in your best interest to find an advising solution that will not charge you a percentage-based advising charge. The reason why is because as your portfolio and assets grow, you will be forced to pay more and more fees. This can set you back from reaching your retirement goals early. Also, pay attention to the embedded fees within the funds an advisor will choose for your retirement portfolio, as these can add an additional layer of road blocks.
FC360 takes a different approach from most advisory firms. Our firm offers professional investment management with the ease of just few clicks. With our simple pricing structure our clients receive professional investment management through one of our Full Service Active Management or our Low Cost Indexing platforms. Additionally, all new clients will receive a free 30-minute video consultation with an advisor as a thank you for being a new client and to help you get started right with your retirement savings.