Everyone knows that planning and saving for retirement should be high on the list of priorities for the working adult. Even if you only put away a small amount each month, compound interest and can let the money build and do the work for you. However, a notable problem can be determining how much money you need to have saved for retirement, and how much to save or a yearly basis.
Without further ado, here are a few tips to follow so that you can have the correct amount of money for when you want to walk out of your job forever.
Figure Out Your Retirement Number
To truly maximize your retirement savings potential, you need to know a few simple things about your future. For example, you need to know when you want to retire and how much money you should have saved based on your particular lifestyle. Additionally, you will need to know if you will have all your debts and responsibilities paid off by retirement age, such as mortgages, loans, and your kids’ education.
So, once you’ve put all these factors together and played around with some numbers, you should have a decent estimate as to how much you’ll need to have saved at retirement age. Don’t skimp with the details. Make sure you write a detailed financial plan so there’s no gray area.
Pick the Proper Investments
Once you have determined how much you need to save, the next step is to figure out where you should invest your hard-earned cash. Uneducated savers would simply use a savings account, but with interest rates hovering under 1 percent and typically, way less than that, it’s important to find investments that will earn you more money. Stocks, bonds, treasury bills, and certificates of deposit are just a few financial tools that will earn you a better return on your investment.
Annuities are also a great investment, as it gives you monthly payments of principle plus interest. And no matter what you choose to invest in, make sure that you monitor it on a regular basis. Just like gambling, no return on stocks is guaranteed. Always be aware that there is a potential for loss and contact a financial planner for some advice.
Change Your Strategy Over Time
Another often overlooked aspect of retirement planning is changing your goals and requirements over the course of your life. You may find that early on in your savings plan, you may be single, so saving extra money isn’t too particularly difficult. As you get older, you may start having new obligations such as cars, mortgages, spouses, and children to think about. That’s why it’s in your best interest to modify your plan as you go.
After making your yearly savings contribution, see if your plan is still working for you, and if not, adjust it accordingly. If you or your spouse lack financial discipline, you may want to consider investing in accounts (such as IRAs or CDs) that penalize you for early withdrawal. That may be the best way to keep your money safe.
Self Planning or Professional Advice
An easy way to save the most money is to gain as much return on your investment as possible along with minimizing cost. That being said, many people are uneducated when it comes to money management, and thus, rely on financial advisors to do their dirty work for them. However, you may stand to save more money by doing this on your own.
By managing your own portfolio, you can see which investments work for you and which don’t. In this manner, you can see if you are becoming closer to reaching your retirement goals, rather than hiring someone else to do it, and learning nothing about your own investments. Try it for a few months just to see how you do. It doesn’t hurt to give it a go.
Determining you annual retirement fund contribution can be one tough subject for many people, but take advantage of every little bit of spare money you can make. 401K’s are a perfect example of free money, as many employers will match your savings. Perhaps you could get an extra job in your spare time to pack away some extra cash. No matter what you choose to do to earn your money, make sure you set goals and make a plan to reach them. Then, once you are ready to retire, you can enjoy a stress-free lifestyle.