In order to retire with financial security, you need to start building wealth from the time you join the workforce. Throughout each stage of your life, you’ll have opportunities to meet important financial milestones that can determine just how comfortable your retirement will be. Make the right decisions, and you’ll ensure peace of mind during a time of life when the last thing you’ll want to think about is how you’re going to make ends meet.
Planning for Retirement in Your 20s and 30s: Debt Is Your Enemy
Developing healthy financial habits as early as possible is essential to successful retirement planning. That means learning how to create a budget and making sure to spend less than you earn. Debt is your enemy during this period of your life, especially the kind generated by high interest-rate credit cards and student loans. If you do happen to find yourself burdened with such debts, make decisions that will help you get out from under them as quickly as possible.
As soon as you have a little bit of money free, you should immediately start saving for retirement. At the very least, make sure you are contributing to your employer’s 401k plan. Have your contributions deducted automatically from your paycheck, and save the max—try not to pay attention to market volatility; this is a long game you’re in.
At this point in your life, you might be wondering, for example, “What is an IRA?”
As you approach your 40s and your earning power increases, however, you will want to educate yourself about the investment options that are available to you.
Planning for Retirement in Your 40s: Get Aggressive
Now is the time to begin saving aggressively. You are probably in or headed towards your peak earning period, and, even if it doesn’t seem that way, retirement is closer than you think. Consider seeking the advice of a financial planner who can track and tweak your asset allocation mix. Be sure you are coordinating your investment strategy with your spouse (joining forces is a much stronger position in this case), and consider putting the majority of your bonuses and raises towards savings.
Other ways to boost your retirement planning in your 40s include getting both Roth IRAs and mutual fund accounts so you have (after-tax) money in places that you can use when you are retired, and building a diversified portfolio of both U.S. and international stocks.
Planning for Retirement in Your 50s and Beyond: Begin to Downgrade
If you weren’t able to save enough in your early years, you can make up for that now by putting aside at least 20 percent of your income into your savings. Start thinking, too, about when you’re going to initiate Social Security. Although you can sign up at age 62, payments are permanently reduced by as much as 30 percent if you begin to collect at this age. Also, if you work and collect Social Security benefits simultaneously at 62, part or all of your payments could be temporarily withheld.
Perhaps most importantly, you should begin reducing your expenses during this time of your life, even if you earning more than you ever have. Consider downgrading your lifestyle, maybe by moving to a smaller house or cutting back on your entertainment expenses. This will not only help you to save more of your money, but also accustom you to living on a fixed income during your retirement.
Bank of Internet USA: Your Retirement Planning Partner at Any Age
Achieving full financial independence so you can stop working with peace of mind in your senior years is no longer an easy prospect. But with proper financial planning and some foresight, it is absolutely possible. Bank of Internet USA, member FDIC, is here to help. One of our dedicated Customer Service Specialists would be pleased to walk you through every step of the investment process. We’re committed to being a true partner in your retirement planning--at any age.
If you would like to learn more about how Bank of Internet USA can help you save for your future, please visit our page devoted to IRA account information
. If you are ready to start a retirement account
, our team of financial planning experts would be happy to help you.