Thankfully, it’s not too late to catch up, but whether you’re twenty-two or fifty-two, the earlier you start, the better off you’ll be. Here are some simple strategies to get you on the path to a more secure financial future, including savings expert Dave Ramsey’s Top 3 recommendations for catching up if you’re behind:
1. Invest in Your Company’s 401K Plan.
A 401K allows you to save pre-tax money in an account that allows you to earn compound interest tax-free. When you retire, you can withdraw the money and it is then taxed like normal income (early withdrawal can carry a hefty penalty, however). Microsoft’s website even offers a helpful Excel-based 401K planning template to get an idea of how much you should start with, what you should contribute, and how raises and company matching can affect contributions.
2. Invest in a Roth IRA.
If your company doesn’t have a 401K plan, think about opening a Roth IRA, which allows you to save after-tax money in a retirement account. Unlike a 401K, money saved in a Roth IRA isn’t taxed when it’s withdrawn, which can have its advantages. If you can afford to, consider investing in a Roth IRA and your company’s 401K.
3. Seek Out Sound Financial Advice From a Certified Financial Planner.
Check out the CFP website for someone in your area, read Yelp reviews and Better Business Bureau feedback, or ask a friend or colleague to recommend someone. A good planner will review your goals and progress with you annually, if not quarterly, to make sure you’re still on track.
4. Check Out These Ten Great Retirement Books.
These books (in the link) will give you some ideas and get you thinking about what you want your retirement to look like. Do you want to be on a beach? Is travel important to you? How many mortgage payments will you have left?
5. Visit the AARP Website’s Free Online Calculator.
AARP gives you a personalized snapshot of your financial future, based on your current lifestyle. The more you know about what you can and can’t live with, the more motivated you’ll be to sow now what you can reap later.
6. Make it Easy.
Planning for retirement doesn’t have to be complicated or difficult. If you put systems in place to automate your financial goals, you won’t have to think about them. The system will take care of them for you!
7. Get Your Head in the Right Place.
If saving is hard for you, it might be time to be honest with yourself about your money habits. Do you have any attitudes that might be sabotaging your savings strategies?
8. If You Don’t Already, Get Used to Living Within Your Means.
You’re not going to have a choice when you’re living on a fixed income, so cultivate this habit now before it’s too late.
9. Pay Off Your Credit Card Debt.
Even if you can’t pay off your mortgage before you retire, retiring with credit card debt isn’t smart. The interest you’re paying on your debt is likely to be much higher than the interest you’re earning on your retirement accounts!
10. Learn How to Customize Your Investments.
Did you know that many 401Ks and Roth IRAs offer options for customizing your investments? These customizations allow investors to select the specific funds they want their money going into, which can run the gamut from high-fee managed funds to low-fee Index Funds. The mix you choose to invest in can cost or save you thousands, if you’re willing to do a little homework. Getting started is the hardest part, but once you take that first step, time will be on your side. Cultivating good money habits, being willing to learn, and putting systems in place to do the heavy lifting for you can ensure that your retirement is secured, and your golden years are happy ones. Featured photo credit: Markgraf-Ave via pixabay.com
