When it comes to retirement, people take varying approaches to saving. Some have the goal of just enough money to make it on their own. Others look forward to a rich retirement without the worry of giving up some of the luxuries they usually enjoy. Regardless of age or income, now is the time to start saving for retirement. There are several things that can be done along the way to ensure that there is plenty of time when the time comes to walk away from a career and retire.
Take Advantage of Employer Contributions
A 401k retirement account through work can be beneficial in that money is taken out of a worker’s paycheck each month. There is no need to write a separate check or make an extra deposit. Retirement savings takes place without any extra thought or effort. While this may not be enough to help someone retire rich, it is a great start. If an employer offers to match any part of an employee’s contribution, this is even better. The employee should contribute at least the amount that the employer will match. This is the equivalent of free money to put towards retirement.
Come Up With a Plan
While money is being stashed away in a retirement account it might be tempting to just let the money sit and never give it another thought. Unfortunately, as a person ages, their retirement plan should change as well. It is important to come up with a plan that aligns to changing circumstances. The plan should include some idea of the amount of money needed to retire comfortably. In most cases, as a person ages, they should monitor the amount of risk involved in their investment accounts.
Check Up on How Things Are Going
It is important to check up on all retirement accounts regularly. However, following the markets every day is not recommended as it can lead to more active trading and worse performance, as well as create anxiety due to its frequent volatility. Tracking investments quarterly or annually is generally sufficient for assessing whether any changes need to be made.
Consider a Roth IRA
Most people like to take advantage of the retirement accounts that can save money when the time comes to file taxes. It makes sense to take advantage of the benefits of savings for retirement now. On the other hand, it might be a good idea to take advantage of a Roth IRA as well. A person saving money in an account right now gets no tax breaks. However, when the time comes to make a withdrawal, there are no taxes to pay. Avoiding taxation during retirement is a great way to stretch a dollar.
Don’t Borrow Against Retirement
Avoid taking money out of retirement by borrowing against it. Also, if a job change means that a retirement account needs to be closed, don’t keep the cash. Instead, roll the money over to another retirement account to continue saving. Money removed or borrowed from an account too early often involves a 10% withdrawal penalty as well as being taxed at a higher rate than it would be during a retirement.