With the average American working till age 66, it may seem like retirement is a long way off. It’s never too early to lay down a plan and save for your future, though!
Here are some tips on saving for your retirement so you can have more financial freedom in the years ahead.
1. Make your Retirement Savings Automatic
Ensure that your retirement savings are automatic. That way, if you have an emergency or lose your job, it will be easy to pull yourself back on track right away.
You can do this by redirecting some money from your paycheck into a separate account for retirement savings.
2. Increase your 401k Contributions by 1% Every Year till You Reach the Maximum Allowed Contribution of $18,500
Suppose you can’t afford to increase your contributions by more than that. In that case, it’s essential to make sure that you are taking advantage of the maximum allowed contribution.
For example, let’s say this year, your employer allows for an $18,000 401k contribution. Next year they qualify for an additional $500 in contributions (meaning starting from January, you can contribute $18500); make sure to take advantage of the higher limit!
By putting away more money in your early years, you’ll end up with a lot more savings down the road and have enough to pay for your long-term care plan.
3. Invest in a Target-date Fund that will Automatically Adjust to Meet your Needs as They Change Over Time
A target-date fund is a sure way to invest your money and have it automatically adjust as you get closer to retirement.
This type of fund will consider your age, investment goals, and risk tolerance to create a portfolio that is right for you.
It’s important to review your target-date fund regularly to ensure that it’s still the right fit for your situation.
4. Consider Opening an IRA if you Don’t Have Access to a 401k or Other Retirement plan
It may make sense to contribute more money to a traditional IRA in certain situations.
If your employer doesn’t offer a retirement plan and you don’t have any other options available, you can open an IRA to save for the future!
One crucial thing about IRAs is that they come with different contribution limits, so you’ll want to make sure that you know the maximums allowed each year.
5. Make an Emergency Fund
An emergency fund is crucial because, by definition, emergencies don’t occur when planned for. If you have savings, you won’t need to dig into other investments or cash flow during difficult times.
Try to save a minimum of three months’ worth of your living expenses, so you know you’ll be able to cover your costs in case of an unexpected event.
6. Start Investing in Stocks
Investing for the first time might sound scary at first. Still, over time it will give people who invest an advantage over those that just save money in a bank account or buy bonds and treasury bills without any risk.
A final note on this is that if you want to become an investor, it might be a good idea to have some help from someone who knows what they are doing so you don’t lose your shirt! An excellent option would be working with a financial advisor or moving money into index funds.
Saving for retirement doesn’t have to be complicated – just by following these tips, you can make sure that you’re on the right track!