5 Ways to Ignite (or Reignite) Your Retirement Savings

retiremet saving

With the presidential debates heating up, and entitlements such as retirement being hot button issues, we need no better reminder that we should take securing our future into our own hands.  Younger generations are becoming aware that retirement is their responsibility, as social security might not mean to them what it means to the baby boomers.  With that in mind, here are 5 strategies for igniting (or reigniting) your personal retirement plan.

Start Now

The earlier you start tucking away dollars, the sooner it will become something substantial. Never underestimate the power of compounding interest! Yes, you might be subsisting on ramen and tap water in your youth, but if you even just take $10 out of your paycheck each month and place it into retirement savings, it helps. As the years tick by, this account will grow and interest will increase in your favor! Your income will also grow, which means this savings habit you’ve developed will come in handy, as you are able to contribute more.

Take advantage of the tax benefits

Because employees do not pay taxes currently on retirement accounts like 401K’s and Traditional IRA’s, there should be a focus on investments that generate the highest current income. This may be the best way for workers to take advantage of a retirement account. Compounding interest is a powerful investing tool. Money put into a 401K with a 7% annual return would double in a ten-year timeframe, through the power of compounding. This might not feel like an overnight success, but before you know it, you’ll have a nice nest egg waiting for you when you need it.

Maximize your employer’s retirement savings plan

In many cases, employers will offer contribution matching to stay competitive in the market and attract top talent. If you employer doesn’t match, that’s ok! A company’s retirement savings structure at least guarantees you can make some tax-deferred contributions to your personal account. Any contribution is better than no contribution.

Be Safe

The closer you get to retirement, the more important it becomes to manage your risk. As a 23-year-old employee, it’s not unheard of for the majority of retirement investments to be in the stock market. 23 year olds have enough time to take risks such as full exposure to the market or even day trading a ‘play account’. A 63-year-old worker, however, should reduce exposure to risk and balance less predictable investments with bonds and other lower-risk assets. When you’re just a few years from retirement, there is less time to recover from a financial calamity. It’s smart to keep a safe portfolio as you approach retiring age to secure your savings in spite of market fluctuations.

Rebalance your portfolio periodically

Check in from time to time to ensure that what made sense a year or two ago, still makes sense today. As we hit life milestones (weddings, babies, relocations, promotions, grandkids), priorities shift. And as various portions of your investment portfolio perform differently, you will want to reallocate your investments periodically to ensure you don’t have too little or too much exposure to certain investments or asset classes. Don’t ignore your portfolio and assume everything is under control. Approach it like you would any other financial account and keep tabs on all generated income and investments throughout the years.

Saving for retirement isn’t necessarily difficult or time consuming.  It just involves getting started; as Woody Allen said, “showing up is half the battle”.  It really is important to just get started. Through discipline and early planning, you can ensure that you’re ready for retirement, with or without government support in the form of social security.

One Response to 5 Ways to Ignite (or Reignite) Your Retirement Savings

  1. Salim says:

    If all you have is student loans and a motagrge you’re doing very well! Don’t worry so much about paying off the motagrge. Since you get tax money back from the interest you pay on that it is somewhat beneficial to have a motagrge. Devote as much as you resonably can to paying down your student loans, but don’t make that your sole focus. Continue to make contributions to your retirement account as well as building up easy-access savings for if you have an emergency. If it were a case of you not being able to make your bills because you are contributing too much to savings and retirement I’d say reduce the retirement savings b/c you don’t want to live your life with that debt hanging over your head and when it’s paid off you will have more to contribute to retirement. However, always try to put a little bit (even 1% of your pay) into an account you can have access to when an emergency comes up. Many people make the mistake of not having savings and putting all their money towards paying off debt and when an emergency comes up they have to return to using credit and they are back at square one.References : I’m a 20-something in debt.

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