Now that the pension on which they have long been depended is fading into history, many consumers are concerned about savings for retirement. Most just don’t know what to do to get where they need to be. With so many options and tips, what is the right way to go?
Studies show that Americans are more insecure than ever about their retirement options. With less than 20% of workers facing a possible pension, that option is not something you should depend on.
It is more important than ever to take advantage of every opportunity you have to increase your retirement savings. This includes your IRA, 401 (k) accounts, and taxable investments.
You don’t need a complete knowledge of investing to be able to retire well. All it takes are a few simple ideas.
Remember, the younger you start, the easier it will be to retire well. If you start late, it is still possible to enjoy a comfortable retirement. Just do not let any more time escape, you will need every penny possible.
It’s like credit cards that add up to years of payments, only the other way around. If you start young, the more you save, the more years of interest you can reinvest and the more money you will earn. Let compounding work for you, not against you.
Take advantage of all the benefits you can to save for the future. Only about 50% of workers are offered in 401 (k). Only 42% take advantage of the plan. Don’t let this go. Most employers will match a portion of your contributions. This is free money. You should give as much as you can to your 401 (k) each year. Once the money is in your account, it multiplies tax-free.
The same is true for 403 (b) s and other equivalent savings programs. Don’t waste the opportunity.
You should take a good look at your 401 (k) plan. When you leave the company, you should probably convert it to a traditional professionally managed plan. Why? Because self-directed retirement accounts return 2% less per year on average than professionally managed plans.
Look at the numbers. If you put $ 100,000 in an account that averages 6% return and another $ 100,000 in an account that averages 8% per year, the difference is staggering. In thirty years, the 6% account is worth $ 574,349 and the 8% account is worth $ 1,006,266.
You should probably avoid get-rich-quick ideas. Don’t chase hot stocks and sectors. Play the game long term. If your company’s 401 (k) plan is too expensive, you should consider maximizing your IRA before investing in the 401 (k) plan. With your IRA, you decide who manages your money. Many of the large mutual fund providers are inexpensive and quite effective.
The key to successful retirement savings is simply doing the math. Contribute wisely and contribute as much as possible each year. Remember, if you dig deep enough into your investments, you may be able to retire early. Now there is a good thought.