If you aren’t on course to save $1 million by the time you retire, you’ll have to get creative. The Motley Fool, a multimedia financial-services company, says that’s the amount of money a couple will need to live comfortably after they retire.
Unfortunately, few people are on track to have adequate savings for retirement. According to a CareerBuilder report, 78 percent of full-time workers said they live paycheck to paycheck.
Of course, starting to save early in your career is the easiest way to save enough money. If you were to save $4,830 annually at 7 percent interest beginning when you are in your 20s, you would reach $1 million by age 65.
If you’re among the many who need to boost the amount of money in your retirement fund, your options range from cutting unnecessary spending to investing wisely. Here are a few ways you can work toward a comfortable retirement:
Take a good look at how you spend your money. Some of the top ways we fritter away money are through dining out at restaurants, drinking alcoholic beverages, paying credit card interest, buying clothes, wasting electricity by not turning off lights, smoking tobacco, keeping the house too warm, gambling, playing the lottery or choosing convenience packaging.
Put spare change toward reducing or eliminating credit card debt, student or auto loans, or your mortgage. The money you save not paying interest is money you can deposit to your retirement fund.
Make Good Investment Decisions
If you have access to a 401(k) through your employer, take advantage of it. It’s an easy way to save and your employer might match some of your contributions — which is the same as free money. Plus, money contributed to a 401(k) is taken out before you get a paycheck, making it easier for you to forget it’s being taken out.
If you don’t have that option, or if you want an extra retirement savings vehicle, talk to a broker about starting an individual retirement account (IRA). An IRA is an investment account you set up through a brokerage firm or financial institution. You contribute money to the account, which is used to purchase investments including stocks, mutual funds and bonds. By opening an IRA, you can contribute up to $5,500 a year if you’re under the age of 50 or $6,500 a year if you’re 50 or older.
Don’t take a break from saving. When you change jobs, get laid off or just stop working, it will be tempting to stop contributing to your retirement fund. If you’re used to saving to a 401(k) fund, you could start an IRA until you’re able to contribute again to a 401(k) with employer matching funds.
You also want to try to resist withdrawing money from your retirement account when life becomes financially difficult. The penalties you’ll have to pay for withdrawing money from your retirement account before age 59 and a half can be daunting. For instance, if you are in the 25-percent tax bracket and you withdraw $10,000 before you’re eligible, you’ll have to pay $3,500 in taxes and penalties.
Plan for Health Emergencies
While no one wants to think about getting ill, it happens. Fidelity Investments, a financial services corporation, estimates that the average couple will incur $275,000 in health care costs during retirement, not including long-term care expenses.
If you have a high-deductible health plan where you work and your company offers a health savings account (HSA), any money you save in the account while you’re employed is yours to use for health expenses — even after you’ve retired.
If you have the time, creativity, knowledge or energy, investigate ways you can make more money. You can always get a part-time job or work as a consultant in your field of expertise. If you have an extra room, you could rent it out on the weekend to travelers through Airbnb or another rental site. If you’re artistically talented, you could sell your crafts on an online site, such as Etsy.
Talk to an Expert
Families today face major challenges in reaching their full financial potential. Over the years, economic conditions have vastly changed the rules; meaning conventional financial advice is no longer working. We believe it’s critical for clients to understand how money really works. Come talk to us today about our tax advantage life insurance plans.
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The information presented and conclusions within are based upon our best judgment and analysis. It is not guaranteed information and does not necessarily reflect all available data.