The media is filled with reports about how the Baby Boomer generation has made insufficient preparations for retirement. However, not all retirees are facing a financial crisis; in fact, many have plenty of money to help them enjoy their twilight years. So why do some Baby Boomers appear ready while others lag?
The key to a successful retirement is getting started as soon as possible. Even if you’re in your twenties or thirties and feel like retirement is far away, it’s the ideal time for setting up effective financial strategies. (Click here to tweet this thought.) By utilizing these techniques now, you will be well on your way toward ensuring a comfortable future!
Are you seeking a secure financial future? Here are eight ways to ensure that by the time you retire, your finances will be taken care of:
- Strategically invest to reach your financial objectives.
Systematic investing encourages disciplined saving, decreasing the likelihood of attempting to time the markets and reducing your typical investment cost. This helps you maximize returns on your investments while minimizing risk.
Investing systematically can be achieved by constructing a budget. A budget allows you to monitor your economic resources, enabling educated decisions about spending; always ensure that you’re spending less than what is earned and saving the remainder. You have multiple routes available for investing – from creating your program, participating in an employer-offered 401k plan, or selecting another program run by an investment firm.
2. Harness the power of compounding
Compounding allows you to create investment earnings from your existing income, making it incredibly effective in the long term. Once you comprehend how this works and witness its effectiveness, chances are high that you will be eager to join too!
Looking at LearnVest’s example, if a 33-year-old person invests only $100 every month earning 1.5 percent in annual interest, by the time they’re 70 years of age that money will have grown to around $60,000! That’s impressive, wouldn’t you agree?
3. Look for an employer that supports your goals
The top-notch companies to work for not only provide competitive wages but also offer amazing employee benefits packages. Their impressive 401k retirement plans come with employer matching contributions, while they may even have an Employee Stock Purchase Plan or a defined benefits pension plan as well – although this is becoming increasingly rare.
If you’re fortunate enough to receive multiple job offers, the incentives should be a major factor in your final decision. By choosing the appropriate employer, you can make great strides toward accomplishing all of your financial ambitions!
4. Maximize your contributions to retirement vehicles
Numerous remarkable employers offer retirement savings plans, but they usually don’t go all the way and match your highest contribution amount. Nevertheless, these companies will still match a portion of what you put in!
If you’re an employee, don’t merely contribute to the level of your employer match – strive for maximum tax deferral as allowed by Uncle Sam. Similarly, if self-employed, there are many retirement saving options available through IRAs that should be maximized wherever possible; both leading to a great return in time.
5. Prioritize low-cost investments for maximum return.
All investment choices should prioritize cost minimization. Investment costs may include the fees paid to an advisor, the management expenses incurred by mutual funds or index funds, and any administrative charges associated with accountants, lawyers, or governmental authorities.
Imagine that you place $100,000 into an investment account for 30 years and reinvest all profits at 6 percent. If the annual cost of your investment is .9%, then after three decades, your total will be approximately $439,000. Alternatively, if you pay a mere .25% fee each year on the same amount over the same period–you can expect to have around $574,000 saved up in 30 years! Vanguard’s example further illustrates this point perfectly.
This significant alteration, particularly when there isn’t an identifiable relationship between the cost of a venture and its return on investment, is evidence of its true power.
6. Marry the right spouse
Marrying for love should be the foremost priority, but money remains a major source of contention in most marriages. Before walking down the aisle, ensure that your savings and investment philosophies align. Set up clear-cut plans regarding spending habits, saving strategies, and investing options to which both you and your significant other can agree in the long term. Whether or not you choose to combine incomes is entirely up to you!
Even though divorce is never desired or planned, take measures to guarantee it does not affect your retirement savings.
7. If you have debt, pay off your high-interest debt first
To diminish your debt burden, it’s prudent to prioritize paying off high-interest-rate debt first before tackling lower-rate obligations.
With the current low-interest rate climate, paying off your debt should take precedence over saving – yet it’s essential to maintain an emergency fund for unexpected needs.
8. Volunteer to help those less fortunate
When you offer assistance to those less fortunate than yourself, it will not only serve as a reminder of how blessed you are in your financial standing – even if there’s still much work left to do before reaching your goals. Moreover, this understanding and the dread of being in their shoes will push you toward fulfilling your monetary plan without fail. It can likewise assist with discovering a higher purpose in life!
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