If you are like most people, your goal is to have enough money when you retire to live a financially comfortable retirement life. To achieve this, you need to accumulate as much retirement fund as possible and with a reliable retirement plan and the following strategies, you can enjoy your golden years.
Ideally, saving for retirement should start in high school, but this is not always feasible. Regardless of your current situation or age, starting to save money as soon as possible, even if the amount is small, can give you more time to accumulate a substantial pension fund.
How much money you should save entirely depends on your financial situation and retirement goals. Saving as much as possible will never be a bad idea, even if it’s more than originally planned, but don’t compromise on your present needs.
Consider your retirement savings as a bill that must be paid every time you receive your salary. Whenever you get paid, immediately deposit a certain amount into your retirement account and do not touch that money. You can put it in a savings account, but make sure it’s a separate account dedicated to retirement funds. Do not mix retirement funds with regular savings.
As time goes by and if you start earning more, consider increasing your contributions to your retirement fund as much as possible. This will help you achieve your goals faster and provide you with extra security.
Investing in real estate is one of the most profitable long-term wealth-building investment strategies. If you haven’t done so yet, start by building credit so you can qualify for favorable mortgage rates to purchase ideal properties and turn them into rental properties.
Managing rental properties requires a lot of time, effort, and money, so be prepared for the commitment involved. Alternatively, you can hire a property management company to handle everything for you. For instance, the Green Residential property management company in Fort Worth takes care of all aspects for their investment clients, including tenant screening, rent collection, maintenance, repairs, and dealing with emergencies.
Even if you don’t mind getting your hands dirty and doing some hard work, hiring a property manager can still be beneficial as they have experience in finding ideal tenants, keeping tenants satisfied, and preventing avoidable issues.
If you’re a new landlord, you may not notice clues or signs as experienced professionals do, leading to choosing bad tenants, resulting in rent delays and severe property damages.
The advice may seem simple, but it cannot be emphasized enough. The earlier you start budgeting, the easier it is to accumulate a significant retirement fund. If you feel overwhelmed by budgeting, start small.
There are several budgeting methods, each with its pros and cons. One of the most common methods is to set aside 10% of your income from each paycheck. However, if you already save 10% in a regular savings account, there may not be an additional 10% going into your retirement account. In such a case, consider either splitting the money in half, with each account receiving 5%, or find ways to increase your income.
When you stop spending on unnecessary items, you’ll have more money to save. The math is simple. Instead of buying unnecessary items, put that money into a savings account. Consider cutting back on the following expenses:
– Streaming services
– Cable TV
– Frequent additional expenses like getting haircuts or manicures every few weeks. Reduce the frequency at least.
– Dining out. Cooking meals at home is much cheaper.
– Impulse shopping
– New phones
– Subscription software services
The average American spends around $18,000 per year on unnecessary expenses. If you can cut out any entirely unnecessary expenses, do so. Saving $18,000 per year will earn you $180,000 in a short 10 years.
Whether you’ve always wanted to open a coffee shop or sell personalized products online, entrepreneurship is a way to increase your retirement savings. Entrepreneurship may sound daunting at first but it’s not as difficult as it seems. You can hire legal experts to ensure you have all the necessary licenses and permits, with the hardest part being attracting customers.
If you find it challenging to navigate the market and advertising, you can hire a marketing agency to assist you. However, this may surpass your budget. In such cases, the best resources are online courses, YouTube videos, and the help from acquaintances made through networking at marketing events.
Professional retirement planners can devise a personalized plan for you. There might be aspects of retirement planning that you are unfamiliar with, and the help of professionals will ensure you don’t make costly mistakes.
If you have set up direct deposit, you can automatically transfer a portion of each deposit to your retirement savings account. This can be a simple account to hold the money until you can transfer it to your actual retirement account. Whichever way, setting up automatic transfers will ensure you never forget and never attempt to skip it.
Many employers offer a 401(k) plan where they match a certain percentage of the amount into employees’ accounts. If available, take advantage of it since it’s essentially free retirement money, and missing out on this opportunity isn’t wise.
When opening a retirement 401(k) account, consult a financial advisor to ensure your setup is correct. While your employer and colleagues may suggest how to go about it, they may not have enough knowledge of what they’re doing. One thing is always correct — you need to contribute enough to get the full employer match. Otherwise, you’re missing out on free money.
One thing you can do to earn extra income is to move into a smaller house, whether renting or buying, depending on your situation. For example, if you already have a small-unit housing, downsizing may not be an option. Even if it’s a similar residential property, mortgage payments may be higher than what you’re currently paying, so you must calculate this effectively.
On the other hand, if you’re renting, the smaller the house, the cheaper the rent. However, how much money you can save depends on your area, the market, and whether your current rental deal is cost-effective. For instance, if you’re paying $1,500 per month for a 1,700-square-foot house and the current rate is $1,800 per month, giving up this deal may not be worth it.
Similarly, if you can comfortably move into a 1,200-square-foot house for $1,300 per month, you could save $2,400 in rent per year, which adds up to $24,000 over a decade.
It’s well-known that the longer you wait to collect Social Security, the larger the monthly amount you receive will be. Some people have no choice and need to start collecting Social Security benefits immediately upon reaching the designated retirement age. However, if it’s not urgently needed, try to delay it as much as possible. Even just one or two years can mean a few hundred extra dollars per month.
Health Savings Accounts (HSAs) are excellent for use after retirement because you can utilize pre-tax funds to pay for eligible medical expenses and then invest the remaining funds. If you don’t use these funds, they roll over each year, remaining tax-free for any purpose during retirement.
High-interest rates always hinder your savings progress. When you have multiple debts, start by paying off high-interest debts first, freeing up more money to put into your retirement fund.
Clearing debts for your retirement life should be a top priority, as you wouldn’t want to retire and still have debts to pay. Get rid of debts as much as possible, starting with considering debt consolidation, which includes negotiation with creditors.
After debt consolidation, you only need to pay a single amount to the debt consolidation company each month. This amount will include the final negotiated settlement amount and their fees. In certain cases, you may qualify with just $5,000 in debt.
Traditional Individual Retirement Accounts (IRAs) and Roth IRAs are both good retirement accounts due to tax benefits. There are four main benefits of opening an IRA:
– Simple and quick, can be processed through almost any bank.
– Traditional IRA is pre-tax income but with tax-deferred growth, so you don’t need to pay taxes on your income until you start withdrawing it.
– Roth IRA uses post-tax funds for investments, so your earnings and withdrawals are tax-free.
– You have control over your IRA account instead of it being employer-sponsored. On the other hand, employer-sponsored 401(k) plans can be altered at any time and you can’t contribute further if you leave your job.
Owning both a personal retirement account and a 401(k) account is a good choice, but be prepared to transfer funds from your 401(k) account to your personal retirement account at some point.
A comfortable retirement life requires making some small sacrifices now to ensure you save the necessary money. How much money you can save depends on your ideal lifestyle and goals.
There are many different ways to build a sufficient retirement nest egg, but all methods involve saving money and reducing unnecessary expenses. This doesn’t mean you have to always live frugally, but sacrifices need to be made along the road to achieving a comfortable retirement goal.