3 Retirement Savings That Make You Make It ASAP | personal financing
If you want to be ready for retirement, you’ll need to make smart financial choices throughout your life. The sooner you start preparing for the subsequent years, the higher your chances of getting the income you need as a retiree.
Not sure where to start exactly? Here are three steps you can take immediately if you want to take the path to a secure future.
1. Set your savings goals
If you want to save enough money to support yourself in retirement, you need to know how much “enough” is. This means that you should set clear savings goals so you know what you’re working towards. This may sound complicated, but there are actually some very simple ways to determine how much to allocate for your future.
One of the easiest options is to simply estimate your final salary and multiply it by 10 to calculate the total amount you want to save. Your final salary is the amount you will make when you stop working. You can get a rough idea of how much it will be by taking your current salary and adding 2% to it each year assuming you get regular salary increases. If you determine that your final salary will be around $50,000 per year, then your savings goal should be to raise $500,000 by the time you are ready to retire.
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Of course, knowing the total amount of savings is just the first step in setting your savings goals because you will invest over time to accumulate your wealth. You can use the calculator on Investor.gov to find out how much to invest each month to achieve your end goal. For example, if you have decided that you need $1.2 million, and after 20 years of retirement, you already have $20,000 saved and expect 10% of average annual returns, you can calculate that you should invest about $1,550 per month to achieve your goal.
2. Set up automatic contributions
To maximize your chances of success in saving enough for retirement, it’s a good idea to consider automating your investments as quickly as possible.
This means that the money is either withdrawn directly from your bank account on payday or withdrawn from your paycheck before you receive it and put it into an IRA, 401(k) or other tax-privileged investment account. By arranging to effortlessly funnel money into your retirement savings without your input, the money is absolutely guaranteed to get where it’s supposed to. You won’t be able to choose to spend it on something else, as the money will be transferred before you get a chance to use it.
3. Diversify your investment portfolio
Finally, once you move your money into a retirement account, you’ll want to make sure you invest it wisely. This is because both the amount you invest and the performance of your investments will determine whether or not you end up with the thing you need for a comfortable retirement.
If you have the ability and your retirement account allows, you can invest in a good mix of different stocks and bonds. If you don’t know how to choose individual companies to invest in, you can opt for exchange-traded funds (ETFs) that give you exposure to different types of assets. And if you want to be completely apart of your investment, you can choose a target fund that allocates your money to an appropriate investment mix given your age and risk tolerance.
By doing these three moves as quickly as possible, you should be able to set yourself up on the path toward a secure retirement. The sooner you start investing to achieve your savings goal – and the more wisely you invest – the better off you will be in your later years.
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