Have you had years of trouble getting motivated to save for retirement? If so, it's completely understandable. Saving for retirement can seem overly arduous and confusing. So what's the best way to dig in and make sure you'll accomplish what you've always wanted to do all along?
Let's take a look at a few tips that can help you so you have enough to meet your retirement goals.
Tip 1: Just get started.
Haven't started contributing yet? It's never too late, so just get started.
It sounds so simplistic (and maybe overly direct), but simply getting started can be the hardest part because, gosh darn it, it's just so daunting.
But think of how much better you feel when you have a plan. Whether it's putting together a plan for a presentation at work or putting a plan together to take care of your messy basement, isn't it true that you often feel way better after you do something about it?
Tip 2: Take advantage of your employer's match.
If you work for an employer, check to see whether your employer offers a match through your 401(k), 403(b) or the equivalent. When you get an employer match, your employer contributes a certain amount of money to your retirement savings plan based on how much you contribute yourself.
Putting money in along with the match can accelerate your retirement savings, plus, it's literally the only time in life when you will get free money. The only time, so take advantage of it!
If you've never been offered a match and your employer has no plans to change that policy, consider getting together with your fellow employees. Put together a match request in writing. You can even go a few steps further and put together a plan for your employer, complete with figures and costs. Encouraging your employer to offer some basic 401(k) options for yourself and your fellow employees can make a huge difference.
If your employer won't offer a match, you may want to save in an individual retirement account (IRA) instead.
Tip 3: Open an IRA.
You may want to open an IRA in addition to your employer's retirement plan. An IRA can offer a great opportunity to save additional money. A traditional IRA allows you to put money away for retirement — you pay taxes when you take money out in retirement.
Roth IRAs, on the other hand, offer different benefits. They allow you to grow your money tax-free. You can make tax-free withdrawals after age 59 ½. You may only contribute $6,000 in 2021 (you can contribute $7,000 if you are 50 or older). Your modified adjusted gross income must not go over $140,000 (for single filers) or $208,000 (for those married filing jointly).
You pay taxes on money you put in the Roth IRA in advance but don't pay any taxes on any future withdrawals. You can take distributions and earnings without paying federal taxes. You also don't have to take required minimum distributions (RMDs) when you turn 72, which isn't the case with other types of retirement accounts.
Tip 4: Take advantage of catch-up contributions.
As mentioned above, you can make catch-up contributions whenever you invest in retirement accounts, as long as you're 50 or older. The following types of accounts allow you to utilize catch-up contributions: 401(k), 403(b), 457(b), SARSEP, SIMPLE IRA, SIMPLE 401(k), traditional IRA, Roth IRA and Health Savings Account (HSA).
Each type of account offers various catch-up contribution options. Investigate how much of a catch-up contribution you can put forth with the type of account you have.
Tip 5: Do the math.
You know what can make you feel even better about taking action? Playing around with a compound interest calculator. When you're not sure how to get started or whether the outcome would even make a difference, plug the amount you plan to save into a compound interest calculator so you figure out how much that will net you over the course of time.
For example, let's say you're 47 years old and plan to retire at 65. Let's say you have $10,000 in a savings account you'd like to invest. If you save an additional $800 per month for 15 years at an 8% return, you'll have $489,660 by the year 2038.
How's that for encouragement? Dream a little bit about how much you'd like to have in your accounts in order to make it seem more tangible. The intangible nature of retirement planning sometimes makes it really hard to get motivated to save, and this might just solve your problem!
Once you do the math, you may want to set an actual goal of investing automatically. Let's go over that next.
Tip 6: Make it automatic.
Want to know one of the most important secrets of saving for retirement?
Automating everything.
When you make your savings automatic, you commit a specific amount of money toward your goals each month. You can choose to allocate a specific percentage or dollar amount toward your 401(k) or IRA each month. When you choose a specific percentage (preferred over choosing a specific dollar amount because automatic percentage increases mean you'll put more toward your retirement savings goals as your salary increases) you don't have to think about it. The money boosts your fund immediately, month over month.
Tip 7: Work on mindset.
Finally, commit to your retirement goals with a dedicated mindset. Developing a driven intensity to go for your goals can make a huge difference in the outcome. Putting a dedicated amount of money toward your retirement can help you reach your goals, no matter your age or how much you've already saved.
Boost your Retirement Savings at Any Age
Once you have the right mindset in place, you'll be unstoppable, no matter your age. Whether you're 25 or 50, you can put a solid plan together to tackle your retirement savings. If you think you might have trouble putting together a good plan (especially when you need help choosing the right investments), reach out to a professional advisor to help you identify the best plan for you.
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