How To Save Successfully For Retirement
The younger you are when you begin preparing for retirement, the more successful your savings will be. Interest compounds over time, so by disciplining yourself to salt away a little extra each month into your retirement fund you can maximize your savings for the future. Also, habits take time to build. If you build good saving habits in your 20s, you will be less likely to encounter financial problems that could cripple your retirement savings in the future.
Often times if something is out of sight or out of mind it can be neglected. Retirement is no different, we all get so caught up in the here and now of our lives that putting money aside for later can get lost in the shuffle. Thankfully, we live in a time where automatic bill pay is the way most people operate. If you set things up to make automatic contributions from your paycheck into a 401(k) or an IRA for your retirement, you won’t forget to make that monthly contribution.
Adjust Your Savings Based On Your Income
Often when you’re first starting out in life with a new job, finances are tight! Different stages of life present differing financial obligations that will either increase or decrease your ability to save. For example, when you’re buying your first house and getting started in life, you may not be able to save as much as when you’re happily settled and working. When you have more flexible income take the time to adjust your retirement savings so that you can save more when your finances are good.
Take Advantage Of Retirement Savings Perks
Often times, employers offer matching incentives, and taxes offer major breaks for those saving for retirement. It’s always a good idea to try to invest at least up to the employer match, because it’s free money! Might as well take advantage of it. Also, those saving for retirement are able to get tax deductions for traditional 401(k) and IRA contributions or tax free growth on after-tax Roth accounts. Be sure you do your home work and talk to a financial advisor to maximize the potential savings perks out there.
Watch Out For Fees And Inflation
The biggest problem for most saving for retirement is the hidden fees attached to so many 401(k) plans. If you’re losing tons of money in annual maintenance fees, you’re not really being as profitable as you would like for your retirement. The more fees you can avoid, the more money goes into your personal savings. Additionally, a “stealth tax” that can erode the purchasing power of your investment is inflation. If your investment is not generating enough of a return to keep up with inflation, your investment could actually be depreciating as the years go on. In today’s low interest rate environment, many investments just can’t cut the mustard as far as profitability. Having some of your assets tied up in the stock market can help keep your return high enough to protect your portfolio from inflation.
For more information on how to maximize your profit potential and improve your retirement savings, speak to a Redhawk Financial Advisor near you today.