Everyone knows saving for retirement is a major part of life and even then, many people don’t have a single dollar. The chief reason is that they do not know how to save for retirement or where to begin.
A study conducted by Ramsey Solutions on the condition of retirement in the US found that almost half of Americans do not save for retirement.
Wishing and dreaming without taking an initiative will not lead you anywhere. You have to do something out of the ordinary if you want your future as well as habits to change. Honestly, saving for retirement is not as hard as you think. We’re going to help you with these three steps:
- The initial step is to set a goal for your retirement savings.
- 15% of your income tax needs to be invested in tax-advantaged accounts like a 401(k) and Roth IRA.
- Going further of 15%- Max out your 401(k) and various other options for investing.
My job is to show you how to save for retirement, step by step, in the easiest way possible, and provide you some actual ways you can charge your savings plan, starting today.
Step by step How to Save for Retirement
Step 1: Set an aim and a goal for retirement savings.
You can’t magically turn your retirement dreams into reality. To do that, you need to know and realize where you are today, dream of where exactly you wish to go, and plan how to get there.
Have you ever thought about what your happily ever after looks like? Sit down for a while and think about what you plan to do in retirement.
When you can finally see your retirement dreams properly, you’ll eventually become more attentive and ready to do whatever it takes.
Step 2: 15% of your income tax needs to be invested in tax-advantaged accounts.
Here’s how you get started with your retirement savings:
Firstly, get the 401(k) match. You need to make sure if you’re offered a traditional 401(k) by your employer, you need to invest enough up to the match to take complete advantage of that free money. If you’ve mutual fund options, you can invest all your 15% there.
Secondly, if you’ve invested up to the match by using a traditional 401(k), you need to start working with a financial advisor to open a Roth IRA.
This is a retirement savings account that gives you access to pay taxes on the money you put into it upfront. To make it even better, this means that any withdrawals that you make after you’re 59½ and the growth in your Roth IRA are tax-free.
Thirdly, if you contributed enough to your Roth IRA and still haven’t reached 15%, then start increasing your 401(k) contributions until you do.
Step 3: Going Beyond 15%
The following are a few for when you’re prepared to invest beyond 15% of your income toward retirement:
The first step is to max out your 401 (k) and/or Roth IRA when you have extra money to invest. If your Roth IRA is ever maxed out for 2019, what you can do is put up to $19,000 (or $25,000 if you’re 50 years or older) into your 401(k).
Before you’re 59½, it’s not possible to take out money from your 401(k) or IRA without encountering an early withdrawal penalty.
For this, you need to open a taxable investment account where you can put and take out as much money as you wish to. However, you’ll still have to pay taxes on any money your account earns.
Buying a rental property can be a successful and great way to earn income but to do so you need to follow some essential guidelines- such as staying local and having an emergency fund for your rentals, but the most essential guideline is that you need to pay cash for your real estate investments.
Financing a rental property is financially risky. Take complete advantage of your HSA because, through that, you can save and invest money to pay for deductibles and other medical expenses tax-free.
Also, once you turn 65, you can take out money for anything you want to while paying taxes on it at the same time, just like a traditional IRA.
How to Save More for Retirement
Saving for retirement might be a challenge, but there are some easy ways to save.
First, you need to cut down your cost of living because it is the major reason people are unable to save for retirement. Even if you get a raise, spend it very wisely instead of buying a fancy car, a new house, etc.
You need to make a monthly budget that you need to follow strictly because it helps you control your expenses.
Second, It’s high time you realize you need to stop overspending on things that are unimportant. Sure, enjoy your life to the fullest but does enjoying really mean you have to waste money on useless things?
You should also check your insurance policies and try getting a better deal on homeowners insurance or car insurance. Another suggestion is that you should cut down on your kids’ extracurricular activities. One activity is more than enough for some time but having more can get expensive.
Then the last saving tip is that you need to get rid of any debts as quickly as possible because every dollar that goes to a debt payment is a dollar you could’ve invested.
A study found that almost one-third of people who are in debt are the major reason why they can’t save for retirement. You need to concentrate well to achieve your goal. If you are looking for options that can yield you better results, opt for platforms like Personal Capital.
They let you have a strategy that you can use for your retirement plan! With the right plan and actions, you can enjoy your life and still work towards your financial goals.
Read also 5 Investments you should go for | Expert’s Choice and How to Invest Wisely? 6 Different Investment Ideas.