Did you know nearly one-third of Americans have not put together a plan for their retirement? That means one-in-three of us have no idea where the funds for retirement are going to come from. Part of the reason is that planning for retirement can be a daunting task. But it doesn’t need to be and here are five retirement planning secrets to enjoy your golden years.
When it comes to planning for your golden years, time is not on your side. I get it, most 25 or 30 year old’s will have a hard time agreeing to this. After all, they have another 40 years of their work lives to worry about what comes next. But life has a way of throwing curveballs at you and the next thing you know you are 50, paying for your kids to go to college and have nothing saved up for retirement.
If that isn’t reason enough to get moving, try this on for size – most experts believe Social Security will run out of money shortly after 2030. Remember, this is the main source of retirement income for most Americans and it will run out of money before many of us will retire.
What does this mean? For starters, you can’t rely on Social Security to be your main source of income. And this means you need to have to plan. Stop procrastinating and start working out a retirement plan today.
Don’t Be Afraid to Invest
Sure, no investment is risk-free but if you stay on the sidelines one thing is sure – you won’t make any gains. Let’s face it keeping all your money in savings is pointless when interest rates are at or near zero.
Instead, you want to look for investments that will provide steady growth over time. If you don’t believe me, then check out the sage advice of Warren Buffett on this topic. After all, he knows a thing or two about investing.
According to Mr. Buffet, the best investment for an individual investor is an unmanaged S&P-500 index fund charging only token fees. From 2008 to the end of 2016, such an investment gained more than 85% and you wouldn’t need to pay those pesky management fees.
Making a List and Checking It Twice
When it comes to retirement, Santa shouldn’t be the only one making a list. You should have a clear budget set out and depending on your age you will need to review that plan at least every two to three years. In this way, you can adjust based on those unexpected twist and turns which life sends your way.
Your retirement budget should include an overview of your expected monthly expenses, how long you plan to live, and inflation. This will give you an idea of how much money you will need. In addition, it will give you an idea of which options will get you the returns needed to help make your money work for you.
Do you really need to take that expensive vacation, or go out to dinner every night? Learning moderation can help to put a few extra dollars in your pocket. Over time this loose change can add up to tens or hundreds of thousands of dollars – all of which can be used to help finance your retirement.
Maximize Pre-Tax Options
Be it a 401(k) or a Health Savings Account (HSA), you want to look at how you can take the maximum deductions. The reason for this is simple – these investments are tax-free! Granted, for some people, we are only talking about a few hundred dollars a year but over time this can add up. Think about it, why wouldn’t you want to take the maximum deductions from these pre-tax investments if you can?
There you have it; these five tips will help to get you on the road to financial freedom which will give you the resources you need to enjoy your retirement.