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Retirement is still looming on the horizon, but that golden date may not be as far off as it seems. Preparing as soon as possible is the wisest decision to ensure that retirement is as financially comfortable as you wish. Whether you’re starting to invest, cut spending, or otherwise, every little step brings you closer to your goals. Discover some tips to put in place now to prepare for your retirement.
1. Manage debt, track expenses and budget
Debt management and expense tracking are the first steps to start saving for retirement. Watch out for excessive borrowing and watch out for high interest loans or lines of credit. Regardless of your age, high interest loans eat away at your monthly cash flow.
Also, start tracking your expenses. Learn where your money is going each month and create a budget that helps you stay within preset limits. Tracking expenses and budgeting forces you to review outgoing expenses and make more conscious decisions. Many people know their income but don’t know exactly where all their money is going.
2. Cut expenses for more potential savings
Once you know your personal cash flow better, you are in a position to make cuts. Reducing expenses allows you to devote more money to retirement savings. Most people have areas of their finances where they could cut spending and still live well. Some ideas may include:
- Save electricity to reduce electricity bills
- Cancellation of a landline service that is never used
- High Interest Credit Card Debt Consolidation
- Shop for cheaper car insurance
- Evaluate and reduce your subscriptions
Sometimes large expenses can be adjusted to free up funds for retirement. For example, downsizing a big house when your kids are grown could mean equity in your pocket for a retirement investment. In addition, a small house is cheaper to maintain, heat and own.
3. Investigate alternative investments for retirement
Whether you already have a 401k or an IRA, alternative investments are worth considering. Alternative investments go beyond standard stocks and bonds. Moreover, they are not so heavily influenced or tied to standard markets. Therefore, these investments bolster an existing portfolio with attractive income potential.
Here are some of the most common types of alternative investments:
- Real estate
- Hedge funds
- Capital risk
Alternative investments are more accessible than ever thanks to the availability of easy-to-access platforms. Many are accessible to the general population, even if an individual does not have a lot of money to invest. For example, you can invest in real estate investment trusts (REITs), which work much like mutual funds.
4. Enjoy free money with employer-matched 401k
If your employer matches your 401k contributions, jump at the chance to grab that free money. According to the latest estimates, approximately 98% of employers offer consideration or a bonus with contributions to a 401k. Even if you’re not fully invested in the business yet, these bonuses can magnify your earnings faster than you would achieve on your own. If you intend to stay with the company until the acquisition, this gives you a great opportunity to create the account.
It’s also important to review your 401k to make sure it has the greatest earning potential. For example, you need to know the savings rate, the fees involved, and what happens with a rollover.
5. Increase pension contributions the more you earn
The overall retirement savings goal should be between 10 and 15 percent of your annual income. Of course, every personal financial situation is different. Some people will be able to contribute more, while others may not be able to allocate as much. When you get a raise, review your savings plans and determine if you can make an adjustment.
Some financial advisers recommend automatically increasing retirement contributions by one percent each year as retirement age approaches. In any case, however, it is best to follow the simple rule that you contribute more with higher earnings.
6. Consider opting for an HSA
Protecting your health is always important, but even the most health-conscious person experiences unexpected illnesses. Unfortunately, dealing with health care expenses that you didn’t anticipate can really hurt your retirement plans. It’s never too early to consider setting up an HSA (Health Savings Account).
HSAs may be offered by your employer, bank, or even your insurer if you have a high-deductible health plan. The beauty of an HSA is the tax advantages. Investments in an HSA account are tax-deferred and you don’t have to pay tax when you withdraw your funds.
7. Make financial plans for retirement and review them often
You are never too young to start planning for your retirement. The earlier you start, the more likely you are to get what you need. Consider what a comfortable retirement looks like for you. Think about how much money you think you will need to support yourself when you are no longer employed. Set goals for debt, assets and savings.
Finally, remember to review your retirement plans often. Changes happen throughout life and affect your financial future. For example, if you move, the cost of living changes, so what you’ll need for retirement may also change. Review your retirement plan every few years, and do so more often as you get older.
Retirement: it’s always closer than expected
Without a doubt, time flies. You may be working hard right now, but the years are passing and the chances of planning for retirement are dwindling. Whether you retire in 10 or 20 years, the age to leave the labor market is coming quickly. If you want to enjoy your time without struggling to make ends meet, retirement planning is key. Some of the smallest moves right now can make all the difference in what your future financial situation will look like.