Guest post from JBowden
After decades of hard work, you definitely deserve to kick back and relax during your retirement. But before you think about what dream purchase you’ll make or where to go for a vacation in your golden years, you must keep track of your finances so you can live out this time of your life without any worries.
So, here are some key ways to help you grow your retirement fund.
Start Saving Now
When it comes to building your retirement fund, it’s often recommended that you start during your 20s — something that unfortunately, only 39% of Americans do. But if you’re not part of that figure, don’t fret.
Although the best time to start saving would’ve been yesterday, the second best time is now. The best way to save up is to make small but sustainable lifestyle choices here and there, which is why our ‘Gain Your Financial Freedom’ post highlights that only paying for what you need can boost your savings in the long run. Whether it’s saving on your phone plan or choosing to eat out less and cook at home more, making these changes now means you’ll be a lot more comfortable in the long run.
Consider a Roth IRA
Many people open up a 401(k) plan to ensure their financial stability in the future. While it may keep your retirement savings safe, the tax deductions that come with using it in the future could be a huge setback — especially considering that tax rates are quite unpredictable. A Roth IRA allows you to set aside your income without worrying about tax cuts you might incur 20 or 30 years from now. As explained by US News, instead of paying taxes when taking out your money, a Roth IRA requires that your tax contributions are made the moment you invest money into your account. This, in turn, lets you collect your retirement savings tax-free in the future.
Investing is one of the best ways to grow your nest egg, and there are two ways you can approach it, depending on your appetite for risk. You can play things safe by shifting towards conservative investments like high-yield savings accounts and bonds. Alternatively, you can take more risks (and more rewards) by transferring funds into your equity investments. Whatever you do, it’s important you look into your current investments to see how you can tweak them to work better for you. This can mean maximizing tax advantages of Roth IRA accounts, or even moving your savings from regular accounts to other investments that can earn you more. One example of this is certificates of deposits. A guide to CDs by Marcus points out that they provide a much better interest rate than regular savings accounts — letting you earn more interest monthly, quarterly, or annually with the same amount of money. Plus, the longer you save, the higher the interest rates can go. You can also consider investing in mutual funds, as they allow you to diversify your portfolio and increase your earnings.
Automate Your Savings
Before cashing in your next paycheck, you should consider setting up an automatic savings plan. The Balance notes that this is a savings system that transfers money from your checking account to specific payments, such as monthly bills and other personal needs. To this end, automating your savings provides you with the great opportunity of making direct deposits each month to your retirement fund. Opting to automate your savings can do a world of good for your financial future, as it lets your nest egg grow over time, while helping you gain a clearer perspective of how you spend your hard-earned money.
We’re always looking for the best advice to help you set yourself up for financial success now and in the future. Do you have any retirement savings tips of your own? Share them with us!