As you’re nearing retirement, you might be feeling anxious about it or you’re excited at the possibility of what you’ll do when you finally retire. Ideally, you’re spending your time traveling and or your favorite hobbies when they retire and not worrying about paying the bills. Unfortunately, this is what many Americans are facing. According to a survey conducted by Fidelity Investments, they found that most people are not saving early enough. In addition, certified portfolio manager and financial planner with FBB Capital Partners, Kathleen Hastings, mentioned she never witnessed a soul complain about having “too much money” for retirement. She adds it sucks to be a senior, especially one with no money.
Even if you may not currently have enough for retirement, it doesn’t mean that you can’t retire. Here are a few strategies you can to if you wish to live rich enough to live comfortably.
Save More Now
If you want to retire wealthy, the first step is to start saving as much money as you can in your savings account. Thanks to compound interest, a little bit will go far no matter how small your monthly contributions may be. The longer you can contribute, the more you will have.
Let’s say you decide to put $400 away per month once you hit 25 then increased the amount by 2.5% annual and earned 7% each year. That person would have about $1.5 million by the time they are 67. Waiting a decade later to do this would mean they would only have about $66,000 at the same age.
Don’t think of savings as a choice, think of it more as a requirement. Michael Hard, certified financial planner at Mollot Hardy, says everyone should save on either a monthly or weekly basis through automation. Those that add funds to their retirement accounts can have their money taken from their paychecks or via a scheduled deposit plan. Hardy adds that setting it up like that will eliminate the chances that you stop putting money aside for your retirement. According to Fidelity’s retirement preparedness study, Americans on average, save only 8.5% percent of their earnings each year. It’s recommended that you save at least 10% –ideally 15% — of what you earn. If you can do more than that, do it.
Reduce Unnecessary Spending
Some people may just believe that they do not have enough money to put on the side to retire, which is simply not true. You can save more than you think if you carefully comb through your budget. Tom Corely, author of “Rich Habits: The Daily Success Habits of Wealthy Individuals” states everyone should look at their statements monthly. He says you are likely to unveil payments for things you no longer use or want. It also helps to shop often for the internet, phone, and TV services for the most competitive rates.
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Ken Weber, author of “Dear Investor, What the Hell Are You Doing?” and president of Weber Asset Management, believes in some risk. He mentioned that most individuals believe the key to investment success is to just save. Although this is true to a certain degree, he believes people should not just store their money in an in savings vault. Weber says you have to be willing to take some risk to get the reward later. He mentioned that for every stage of life, they should be invested with as much risk as they can tolerate. Ideally, people would put a majority of their retirement savings into a stock mutual fund when you are in the 20s or 30s.
As you get older or are near retirement age, you have the choice to lower that risk by investing in fixed-income assets like bond funds or stocks. Alternatively, you can think about a target-date fund that will automatically fix your allocation of bonds and stocks.
Mollot Hardy also adds that a person should never put all of their retirement funds in one basket. The best thing you can do is to diversify your portfolio with a combination of bonds and stocks. Getting a hold of mutual funds would be even more ideal since they contain an array of bonds, stocks, or both.
If you decide you want to invest in mutual funds, monitor the expenses and fees companies charge. It is important to keep your eyes completely peeled on this one because they can eat into your returns and decrease the amount of money you can have saved for retirement. According to the US Department of Labor, if expenses and fees on your account are 1.5%, for example, you will have a balance that is 28% less once you hit retirement compared to somewhere else where the fees were only .50%. You will likely have several plans offered to you via your 401, which all have various fees, so think about switching to investments with lower rates.
If you work somewhere where your employer matches any contribution you make to your workplace retirement plan, ensure to contribute enough to get a complete match or else you are losing cash. Most will match 50 cents for every dollar. Continuing on the investment route, you can also get tax-free retirement income with a Roth when you contribute to a Roth IRA, which can help you with taxes when you’re retired. Another option is to create a side business to increase your income. You can also get a second job or start doing the hobbies you love while making money from it. One example is to think about purchasing income-generating real estate. Todd Tresidder, a financial coach and founder of FinancialMentor.com says that the trick is to buy and finance a place carefully and not rush through it. If you are thinking about working as a self-employed, you may be able to contribute to a Simplified Employee Pension (SEP) plan or solo 401k. Using either of the two will still be tax-deductible for you.
You might also want to consider downsizing your home when you’re ready to retire. Cutting costs from rent or mortgage to utility, insurance, and maintainable fees will be reduced. While you are thinking about that, you may want to relocate to a different city or state that is cheaper.
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If you feel overwhelmed, find professional help from an advisor if you feel you need help creating a financial plan and want to stick with it. You should look for help from a Financial Analyst (CFA), Chartered Financial Consultant (ChFC) or Certified Financial Planner (CFP)