Ah, retirement. The word alone brings to mind carefree travel, spending time with loved ones and putting the stress of work aside to learn an endless assortment of new hobbies. In reality, however, retiring comfortably means starting the planning and saving process early, and making the right moves every step of the way. It’s a lifelong journey, and the sooner you can get serious about it, the more likely it is you’ll be spending your retirement days in comfort, as opposed to worrying about whether or not you’re going to run out of money.
Saving for retirement isn’t always easy, but as one-in-four 65-year-olds today will live past the age of 90, it’s extremely important to focus on. Here are four tips to get you started.
1. Maximize Your Employer’s 401(k)
If you work with a company that offers a traditional 401(k) plan, you’re in luck in terms of retirement planning. A 401(k) allows you to contribute pre-tax dollars, which can come with some serious tax advantages and make it possible to invest extra income without having it noticeably affect your budget. Though becoming more of a rarity with each passing year, many employers do still offer a match on 401(k) contributions, which is essentially free money—take advantage of it by contributing as much as possible to your plan and focusing on what it will mean for your financial future.
2. Don’t Overlook the Roth IRA
While 401(k) plans can certainly be beneficial as retirement savings vehicles, they’re not everything. Indeed, no retirement savings account offers the kind of flexibility and versatility characteristic of the Roth IRA, which is an ideal tool for building your nest egg. Unlike your employer’s 401(k), Roth IRAs are funded with post-tax dollars, which means the money can be withdrawn without having to pay any taxes once you reach the age of 59 ½ (so long as the account has been open for five years). Plus, Roth IRAs offer a number of investment options, making them less limited than most 401(k) plans.
3. Invest Gifts and Inheritances
Money that seems to appear out of nowhere, whether in the form of gifts, inheritances, or even a 20-dollar bill that shows up in your laundry, is often viewed as “fun money,” due to the fact that it materializes randomly. But that’s not to say gifted cash should be spent frivolously. If anything, gifts, inheritances and found money make excellent retirement investments and can help to pad your nest egg with each new contribution.
4. Work with a Financial Planner
As good as some may be with managing a budget, the fact is most people are not financial professionals. There are a great deal of benefits that come along with taking retirement into your own hands, but you can maximize your efforts by working with a financial planner who has expertise in this area. Though it will cost you some up-front, the health of your portfolio and peace of mind associated with knowing that you’re working with a true professional will be worth the investment.
Planning for retirement can be challenging to say the least, but it’s possible to plan effectively by starting early and focusing your approach. Don’t wait around—you’ll thank yourself down the road.