If you are one of those people who worries about having enough money to retire, you are not alone. All hope is not lost, however, and you can still accumulate a sizable retirement fund – whether you have made a lot of money during your working years or not.
Successful retirement planning takes a lot of hard work. From learning to create and stick to a budget in your working years, to using your peak earning years wisely while making art investments, it’s important to remember that saving for retirement is not a dead sprint, but rather a marathon you should pace yourself on for the long-term.
Everyone needs to take responsibility and create a retirement fund that allows them to live comfortable. Those who are currently looking forward to retirement are likely to live longer after retiring, with advances in health care being the major reason for this longevity. These extra years make it even more important for people to plan ahead and ensure their retirement will be one that will be financially secure and pleasurable.
The process of learning how to reach this goal can appear to be overwhelming. Meeting with a certified financial planner is helpful, yet there are additional steps you can take to create a financial plan that will offer a bright future during your retirement years.
Start Saving NOW
If you are currently having problems paying off student loans or even rent, the idea of contributing to a 401(k) plan seems unrealistic.
However, do not let overwhelming expenses be an excuse for inaction. The opportunity is there, so if you choose to not take advantage your retirement goals will, in the long run, get set back. Learn to achieve the right balance.
Your tax bracket does not matter. The opportunity to become wealthy for retirement is made possible by the power of compound interest. Investing $25,000 by age 25 at 12 percent interest will end up with more than $2,000,000 by age 65. This is true even if not one cent more is added to the account. If the person waits until age 30 before starting to invest, it will take more than three times the amount to achieve the same result. The math shows that the best way to achieve your retirement goals over the long run is to start when you are young.
Use an Aggressive Investment Strategy
Be wise in your planning and be wise in your investment approach. Including lifecycle or lifestyle mutual funds in your strategy allows even the beginning investor to achieve diversification in stocks. These types of mutual funds can be customized to meet the investor’s age and retirement goals. The reason is, these funds are designed to automatically select the equities that will balance the holdings over the life of the investment.
This investment mechanism buys and sells shares that will keep the mix of risk and return based on the age bracket.
Seek retirement funds that are geared towards your age bracket. The likely choices will be more aggressive for younger people. If you look towards a balanced investment fund, it is possible to have as much as 40 percent of your money in bonds, typical for this type of fund.
Build a Strong Reserve of Emergency Cash
When emergencies arise, you do not want to use credit cards to help you through. With the interest rates added to these amounts it will only increase the amount you owe taking it longer to pull yourself out of debt.
An emergency cash fund will help if your car dies, your roommate cannot pay the full rent or some other financial mishap occurs. The estimated amount for a safe emergency fund is three months’ worth of living expenses, but any amount is better than relying on credit cards. An easy way to start this account is to have automatic withdrawals deposited right into a special account for emergency use.
Here are three steps to begin today to get you on the right path. Don't delay- start building a secure future for yourself now.
1. Investment account.
Online investment accounts can be set up for free. Even if you do not have any money to deposit today, set the account up so it is ready next week or next month when you have money available. Having an account in place when you have the money ready is a good first step.
2. Begin with small amounts and automate.
Start with your next paycheck to automatically deposit from your checking account into the investment fund. If you begin with small amounts, about 2% of your paycheck, you will barely notice the amount has been taken out.
Slowly increase the amount of the withdrawal so that by the end of one year you are depositing 15% of your pay into the account. When I used this method for my deposits, I was able to increase my savings to 20% of my paycheck. Whenever I came into extra cash I increased the deposit so I was saving even more. Start with your emergency fund first and when you have set aside approximately $500 you can begin working on the Retirement Savings.
3. Share your strategy with others.
Once you have successfully gotten your investment account established and are making deposits into it regularly, share what you've been able to do with others. Let your family members, friends and co-workers know how you are contributing to your future. Choose to share with those that will congratulate you and keep you on track for continued success. Sharing on social media can also spark interest in others and create discussion in your immediate circle. Often times others are motivated by your strategy, or you can learn new ones to try.
Do Not Overspend – Avoid Adding Debt
Control your spending and do not over spend as splurges can add up fast. You want to avoid having to use any of those emergency funds to cover amounts that you've gone over on a month. Losing interest on money or paying interest and fees is a waste of your future.