Traveling the globe, moving to a house on the beach, checking off items on your bucket list—whatever your plans for retirement are, a solid retirement savings plan is a vital part of building a financially secure future. The average age for retirement has increased over the past decade from 63 years old to 67 years old. The reason being is that working adults are finding it more difficult to save more for retirement during this economic recession. In fact, less than 50% of Americans have over $10,000 saved for retirement, and a whopping 36% of Americans have no retirement savings at all. However, there are a few golden rules of retirement savings that have proven to be successful. Here are the top five:
1. Calculate. Determining how much money you will need to maintain a comfortable lifestyle if the first step in saving for retirement. Ask yourself: When I retire could I live off of half of my current income? Most financial advisors would say that you cannot. Retirement experts suggest that the average person would need at least 70% (and all the way up to 90%), of their pre-retirement income in order maintain the standard of living that they have become accustomed to. You should also take into consideration what you want to do when you retire. Have you dreamed of moving to the state of Florida, or traveling throughout Europe? Calculating these various things will help you decide how much money you need to put away for retirement. Get started now my using this retirement calculator.
2. Start Early. Ok, so know that you’ve done the math and know approximately how much money you should be contributing to your savings each month, now it’s time to put your money where your mouth is. Perhaps one of the biggest mistakes people make in regards to retirement savings is waiting too long to start, which could result in a late retirement. Some experts suggest that you start as soon as you get settled into your lifelong career, which could be as early as 22 years old. The following is an example excerpt from CNN Money Magazine that illustrates the benefits of staring early.
Say you start at age 25, and put aside $3,000 a year in a tax-deferred retirement account for 10 years – and then you stop saving – completely. By the time you reach 65, your $30,000 investment will have grown to more than $472,000, (assuming an 8% annual return), even though you didn’t contribute a dime beyond age 35.
3. Consider Investing. Saving is one thing, but investing is a whole other issue. Imagine being able to double your savings, or even triple. There is no question about it, investing does come with risks, however it can yield very favorable results as well. The important thing to remember when investing is that time is the most important factor. You must give your investments time to grow. You may want to consider linking up with a financial advisor who can show you the ins and outs of the investment world and help you see a profitable return.
4. Open an IRA. IRAs, or Individual Retirement Accounts, are one of the safest ways to save for retirement. A lot of financial specialists recommend them because of the fact that they often are non-taxable depending on whether you have a Roth IRA, a traditional deductible IRA, or a traditional nondeductible IRA. In addition, IRAs have the ability to gain pretty decent rates of interests. Click here to learn more about which IRA is best for you.
5. “Set it, and Forget it”. The last step, and perhaps one of the most important steps is DON’T TOUCH YOUR RETIREMENT SAVINGS! Imagining building your dream house for over a long span of time and then just knocking it down one day. Dipping into your retirement fund is essentially the same thing—years of hard work and saving gone down the drain. Withdrawing money from your retirement fund too early can result in fines, penalties, and loss of tax benefits and even loss of interest.
Professionals within the finance industry suggest that following the steps outlined above have proven to be beneficial to those trying to save money for retirement. However, if you find those steps to be unfavorable there are other options. Selling your life insurance policy can supplement your retirement savings fund, allowing you to have more flexibility and help diminish any stress related to your finances and retirement savings. For more information on life settlement options that can help with your retirement savings plan, give us a call today at 877-303-9777.