Ease Your Way into Retirement Savings Like a Pro

7 Easy Ways to Start Your Retirement Savings

retirement savings

(MP) Asking a 25-year-old to save for his 75-year-old future self is like asking him to give money to a stranger. But, simply put starting retirement savings at a young age it’s more lucrative. But, that may not be you. So, what can you do? Start saving with an eye on money management, keep saving, and set goals and stick to them. If you are already saving, whether for retirement or another goal, keep going! You know that saving is a rewarding habit. If you’re not saving, it’s time to get started. Start small if you have to and try to increase the amount you save each month. The sooner you start saving, the more time your money has to grow. Make saving for retirement a priority. Devise a plan, stick to it, and set goals; it’s never too early or too late to start saving.

Powerful Retirement Savings Secrets

Remember, the first step in retirement planning is to start as soon as possible. Set a date and begin planning from there. The earlier that you start investing  in your retirement account, the more that your money can compound and grow, this will allow you to take away a sizable amount of money by the time you reach the age of 65.

1. Saving for Retirement

One important way to cut the anxiety of taking on market risk is to make sure you have enough savings in the bank to cover the day-to-day costs of retirement. Start saving money as early as possible or, if necessary, convert a part of your retirement money to short-term cash. If neither of these strategies is impossible, then plan to keep working a while longer.

Every year avoid draining your retirement savings, they have a chance to compound and grow. That can make a huge difference in your choices later on, when you will need lots of flexibility and control over your money.

2.  Watch out for Annuities

Annuities can be thought of as after-the-fact pension plans. You buy them from your insurance company and they take on the risk of both market losses and your personal longevity. You may like the idea of no-fuss, guaranteed income, at least until you get a year or two into the plan. That’s when you’ll find out the real cost of your annuity. Although insurance companies do offer retirees useful options, you have to be careful when considering these products. Their fees can be excessive and the returns are often far lower than what you were led to believe.

3. Diversify Your Investments

Most do-it-yourself investors who understand the problems with annuities either build a stock and bond portfolio on their own or buy an income-oriented mutual fund.  Building a simple portfolio is not rocket science, and there are plenty of inexpensive funds out there that can help automate the process at a low-cost.

If you go the self-managed route, be sure not to overdo it on bonds early on. Most retirees will live years longer than they assume, and they will need stocks to overcome the effects of inflation.

4. Manage Your Portfolio Wisely

If you like the idea of a portfolio, consider building a balanced mixture of six to eight investment types, in the style of the major universities and pension funds. Re-balancing a long-term portfolio, even one that leans toward conservative, income-producing investments, is the key to lowering risk. You can create a powerful yet simple portfolio using online software and inexpensive ETFs for exposure to each asset class.

5. 401K Investments

Most start investing through a retirement account: Employer-sponsored accounts, such as a 401(k), will offer a amount of investment choices selected by the company, while individual retirement accounts will open up to you a much broader universe of investments. If your employer offers a 401(k) plan and will match your contributions, don’t leave that “free money” on the “money management” table. Because contributions are taken from your pay before your employer withholds income tax, you may be able to reduce your tax bill, and more of your money will be able to go to work for you. Remember, if your employer doesn’t offer a match, it’s still important to invest as much as you can now and let your earnings have an opportunity to work in your favor.

6. Fund an IRA

Once you’ve maxed out your workplace savings plan, a Roth or Traditional IRA lets you save with tax-free growth or on a tax-deferred basis.

7. Stocks

Over the long-term, stocks offer the best returns for patient investors: Since 1926, stocks of large companies, such as, have gained 10% annualized, while small-company stocks have won 12.5% annualized. Going forward, we think 8% returns are reasonable to expect on stocks.

In the end, retirement investing is no different from investing at any other time in your life. You have to take a measured risk to set yourself up for a reasonable gain over time.

More Resources:

IRS has a bunch of retirement savings plans you should see.

If you already have over $500K see: Fisher Investments

Looking for Tax Shelters see: About.com

Also Bankrate.com has loads of advice on Retirement Investments.

Don Briscoe
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Don Briscoe

Finance educator, advisor, and leading voice in the global financial literacy movement.Founder and editor of MoneyPacers.com.He lives and enjoys life with his family in New York.
Don Briscoe
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