The economy is always in flux. Some years it’s good, and some years, not so good. Hopefully you’ve put a little away every month, and are starting to dial back your workload. If retirement is in your future, we provide access to financial planning to get you there.
“Start planning for retirement early…preferrably in your 20’s. The earlier you start, the better you can leverage compound interest, where your money can work for you over the long haul.”
If you’re just beginning to put money away for retirement, start saving and investing as much as you can now, and let compound interest, the ability of your assets to generate earnings, which are reinvested to generate their own earnings, have an opportunity to work in your favor.
401K or Roth If U Can
If your employer offers a traditional 401(k) plan and you are eligible, it allows you to contribute pre-tax money, which can be a significant advantage. Say you’re in the 12% tax bracket and plan to contribute $100 per pay period. Since that money comes out of your paycheck before federal income taxes are assessed, your take-home pay will drop by only $88 (plus the amount of applicable state and local income tax and Social Security and Medicare tax). That means you can invest more of your income without feeling it as much in your monthly budget. If you don’t have a 401K, there are other options. A Roth account works well, and you can talk with a financial advisor to get help setting that up.
Pay Yourself First
You’ve probably heard the phrase “pay yourself first.” Make your retirement contributions automatic each month and you’ll have the opportunity to potentially grow your nest egg without having to think about it.
Examine your budget. You might want to negotiate a lower rate on your car insurance or save money by not working at Starbucks, where a coffee is the cost of a nice lunch. Find places to reduce the costs of everyday expenses, and put that in savings.
Knowing how much you’ll need not only makes the process of saving and investing easier but also can make it more rewarding. Set benchmarks along the way, and gain satisfaction as you pursue your retirement goal. If you reach the goal, feel free to treat yourself to a treat.
Stash Extra Funds
Have you come into a little extra money? Don’t just spend it. Every time you receive bonus money, increase your contribution percentage. See if you can dedicate at least half of the new money to your retirement plan. And while it may be tempting to take that bonus and splurge on a new pair of shoes or a vacation, don’t treat those extra funds as found money. Treat yourself to something small and use the rest to help make big leaps toward your retirement goal.