If you are like most people, your goal is to have enough money in retirement to live comfortably. To achieve this, you need to accumulate as much retirement savings as possible and with a reliable retirement plan in place along with the following strategies, you can enjoy your golden years in peace.
The ideal scenario would have been to start saving for retirement in high school, but that’s not always feasible. Regardless of your current situation or age, starting to save as soon as possible, even if the amounts are small, can work in your favor. Taking action promptly will have time on your side, allowing you more time to build a substantial pension fund.
The amount to save entirely depends on your financial situation and retirement goals. Saving as much as possible never hurts; even if it exceeds your original planned amount, try not to compromise your current well-being.
Consider your retirement savings as a bill that must be paid every time you receive a paycheck. Each time you are paid, immediately set aside a certain amount into your retirement account and refrain from using that money. You can deposit it into a savings account, but ensure it is a separate account dedicated solely to retirement funds. Do not mix retirement savings with regular savings.
As time progresses, if you start earning more income, try to increase your retirement contributions as much as possible. This will help you achieve your goals faster and provide you with some additional security.
Real estate is one of the most profitable long-term wealth-building investment strategies. If you haven’t already, start building credit so you can qualify for favorable mortgage rates to purchase ideal properties and convert them into rental units.
Managing rental properties requires a significant investment of time, energy, and money. Be prepared for this. Alternatively, you can hire a property management company to handle everything for you. For instance, the property management company Green Residential in Fort Worth manages all affairs for their investment clients, from tenant screening, rent collections, repairs, routine maintenance to handling emergency calls.
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 extensive experience in finding ideal tenants, keeping tenants satisfied, and preventing avoidable issues.
As a new landlord, you may overlook clues or signs that more experienced professionals notice, leading to poor tenant choices, rent defaults, and significant property damages.
The advice may sound simple, but it cannot be emphasized enough. The sooner you start budgeting, the easier it will be to accumulate a substantial retirement fund. If you feel overwhelmed by budgeting, start small and work your way up.
There are several budgeting methods, each with its pros and cons. One common method is to set aside 10% of your income from each paycheck. However, if you already save 10% in a regular savings account, there might not be an extra 10% going to the retirement account. In such a scenario, consider splitting the money equally between the two accounts or finding ways to increase your income.
Saving more money becomes possible when you no longer spend on unnecessary things. The math is simple. Instead of buying unnecessary items, redirect that money to your savings account. Consider cutting back on expenses like:
– Streaming services
– Cable TV
– Frequent discretionary expenses like bi-weekly haircuts or manicures. At least reduce the frequency of these services.
– Dining out. Cooking at home is much cheaper.
– Impulse shopping
– New phones
– Subscription software services
On average, Americans spend around $18,000 annually on unnecessary expenses. If you can cut back on any completely unnecessary expenditures, do so. Saving $18,000 a year will earn you a net $180,000 in just ten years.
Whether you’ve always wanted to open a coffee shop or sell personalized products online, entrepreneurship is a way to boost your retirement savings. While starting a business may seem daunting, it’s not as difficult as it appears. You can hire legal experts to ensure you obtain all the necessary licenses and permits, with the most challenging part being attracting customers.
If you encounter difficulties in navigating the market and advertising, consider hiring a marketing agency to assist you. However, this may exceed your budget. In that case, the best resources will come from online courses, YouTube videos, and connections made through networking events.
Professional retirement planners can tailor a personalized plan for you. There may be aspects of retirement planning that you’re not familiar with, and the assistance of professionals will ensure you avoid costly mistakes.
If you’ve set up direct deposit, you can automatically transfer a portion of each deposit into your retirement savings account. It can be a simple account where the money sits until you transfer it to your actual retirement account. Either way, setting up automatic transfers ensures you never forget and aren’t tempted to skip a transfer.
Many employers offer 401(k) plans where the employer matches a certain percentage of money to the employee’s account. If available, make good use of it, as it’s essentially free retirement money, and missing out on this opportunity wouldn’t be wise.
When setting up a retirement 401(k) account, consult a financial advisor to ensure your setup is correct. Your employer and colleagues may offer suggestions on how to proceed, but they may not necessarily have enough knowledge about what they’re doing. However, one thing is always right – contribute enough money to get the full employer match. Otherwise, you’ll be missing out on free money.
One thing you can do to earn extra income is to move into a smaller house, whether through renting or buying, depending on your situation. For instance, if you already have a small dwelling, downsizing further may not be possible. Even with similar housing, mortgage rates may be higher than what you currently pay, so you must carefully calculate this.
On the flip side, renting a smaller property generally means cheaper rent. However, how much money you save depends on your area, market, and whether your current rental deal is cost-effective. For example, if you’re paying $1,500 monthly for a 1,700-square-foot home and the current price is $1,800, reneging on the deal may not be worth it.
Likewise, if you can comfortably move into a 1,200-square-foot home for $1,300 per month, you can save $2,400 in rent annually, which amounts to $24,000 over ten years.
It’s widely known that the longer you wait to collect Social Security, the more significant your monthly payouts. Some people have no choice and need to start receiving Social Security benefits the moment they reach the designated retirement age. However, if you don’t urgently need it, waiting a bit longer can add a few hundred dollars to your monthly benefit.
Health Savings Accounts (HSAs) are excellent for post-retirement use as you can utilize pre-tax funds for qualified medical expenses and then invest the remaining funds. If you don’t use these funds, they roll over each year, available tax-free for any purpose during retirement.
High-interest rates always hinder your savings progress. When you have multiple debts, prioritize repaying high-interest debts first. This can free up more money to contribute to your retirement fund.
Clearing debt should be a top priority for your retirement life. You don’t want to retire with debt to pay off, so do your best to eliminate debt. Debt consolidation should be your first consideration, which involves negotiating with collectors.
After debt consolidation, you only need to pay one amount to the debt consolidation company each month. This payment covers the final negotiated amount to settle your accounts and their fees. In some cases, you might be eligible even if you have debts as low as $5,000.
Traditional Individual Retirement Accounts (IRAs) and Roth IRAs are both good retirement accounts due to tax benefits. Opening an IRA offers four key advantages:
– Quick and easy setup, possible at nearly any bank.
– Traditional IRA is pre-tax income with profit tax-deferred growth, so you don’t need to pay taxes on your income until you start withdrawing.
– Roth IRA uses after-tax funds for investment, meaning your earnings and withdrawals are tax-free.
– You have control over your IRA account, unlike employer-sponsored 401(k) plans, which can be altered anytime, and you can’t contribute if you leave the job.
Having both a personal retirement account and a 401(k) account is a solid choice, but be prepared to transfer funds from the 401(k) account to the personal retirement account at some point.
A comfortable retirement life requires making some small sacrifices now to ensure you save the needed money. How much 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 skimp on necessities, but you need to make sacrifices on the road to achieving a comfortable retirement goal.