No matter how much money you’re planning to have when you retire, you can always use more. With more workers prioritizing income stability over retirement savings, building a nest egg can be challenging.
It’s never too late to build a nest egg. Although life rarely goes according to plan, here are some smart moves you can put into action now that will help you live comfortably during your retirement.
It’s true, the earlier you begin saving for retirement, the better. The power of compounding growth can significantly boost your savings over time and even small contributions made consistently can grow into a substantial nest egg. Starting a nest egg at any time in life is commendable, but the longer you wait, the more you’ll have to put in to see any significant returns.
Set Clear Goals and Stay Focused
How much will you need in retirement to maintain your desired lifestyle? Your retirement savings objectives should be specific, achievable and measurable, enabling you to be focused and motivated throughout your investment years. Consider factors like living expenses, healthcare costs, travel plans and any other expenses you foresee in the short- and long-term.
Create a Budget
Budgeting money is difficult. But setting up a budget — a plan to spend your money for a specified period of time — is easy. By projecting potential revenue streams and expense barriers, you’ll be able to keep your money tight and focused on essentials. Eliminating debt, identifying areas where you can cut back on unnecessary expenses and redirecting those funds toward your retirement savings will help in the present and the future. In times when less income is coming in, there will be cuts that will need to be made. Ramsey Solutions recommends setting aside 15% of your gross income toward retirement savings.
Contribute to Retirement Accounts
Workers are likely to rely on their workplace defined contribution (DC) retirement plans as a source of income. Tax-advantaged retirement accounts, such as 401(k)s or IRAs, offer tax benefits and can help your money grow faster. If your employer offers a 401(k) matching program, try to contribute enough to get the full match.
Diversify Your Investments
Placing your retirement savings into multiple investments, such as such as stocks, bonds, real estate and mutual funds can improve your possible returns and help reduce risk and volatility. Ideally, you want your retirement savings to remain stable over time, so you should avoid relying on one investment class determining, and potentially damaging, the money you’ve saved.
Stick With It
Smart investors know to avoid making emotional decisions based on short-term market fluctuations. Keeping your investments in the market for a long time is smarter than trying to time the market, so remaining focused on your long-term goals and sticking to your investment plan is essential.
Review Your Plan and Fees
Rather than setting and forgetting your investments through automatic payments, you should occasionally be reviewing your retirement plan and make adjustments as needed. As you get closer to retirement, consider shifting your investment strategy to a more conservative approach. You should also be regularly checking the investment fees and expenses you’re incurring, as they can eat into your returns over time.
Maximize Social Security Benefits
With few exceptions, you should wait as long as you can to start collecting your Social Security payments, but you should understand how Social Security works and consider the best time to start claiming benefits given your individual circumstances.
Go to a Pro
If building a substantial nest egg was too simple, there’d be no need for professional financial advice. Savings options, investing, retirement planning… these things all require hard work and research. Luckily, qualified financial advisors can guide you through the creation of a personalized plan. It would be wise to avail of their advice.
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