Retirement starts in your sixties, but you should be planning and preparing for it throughout the time you’re working. However, many people don’t know the right way to prepare for retirement. The money you save shouldn’t only be what you save from working.
To make a big difference in your retirement fund, you should also be investing throughout your life. Although investing may seem intimidating, especially with money as important as your retirement fund, it doesn’t have to be a difficult process.
With the right investment strategies, investing can be simple and easy. Learn about ten investment strategies that can help you prepare for retirement.
1. IRA or Roth IRA
An IRA and a Roth IRA are types of individual retirement accounts. These are not offered by employers but rather opened by you yourself. This can be a great savings option if your employer doesn’t offer a 401K.
The two are similar, but contributions to a Roth IRA are made after taxes, allowing you to take your money out tax-free. The money in a traditional IRA will require you to pay taxes on what you withdraw in the future.
2. Contribute to a 401K
Many employers offer a 401K and sometimes a 401K match. A 401K is a tax-advantaged retirement account that is sponsored by employers. Most people automatically have a portion of their wages contribute to their 401K.
A 401K lowers your taxable income for retirement, so it’s a great tool to save up for the future. If you have a 401K, and especially if your employer offers a 401K match, you should contribute as much of your paycheck as possible.
3. Fixed Annuity
Think of a fixed annuity as a safety net that can protect you from running out of savings or poor investments. A fixed annuity is insurance that will give you a set income for a specific amount of time.
The terms of how much you receive and for how long depend on the fixed annuity that you purchase. But this can be a great option to ensure you have money in the future.
4. Health Savings Account
Now is also a good time to start thinking about your future health. There is a good chance that your health expenses will rise in the later years of your life. That’s why it’s a good idea to start saving for those expenses now.
Consider a Health Savings Account (HSA) to pay for any future health-related expenses. You contribute to these similar to a 401K or a Roth IRA. The contributions are tax-deductible, and growth and withdrawals are tax-free.
5. Start Early
Of course, starting your retirement savings early will allow you to save more. Beginning to save in your twenties is ideal, but if you’re older than that, it’s not like you’ve missed the deadline.
If you’re in your thirties, forties, or even fifties and haven’t started saving, now is the time to do so. The sooner you can start, the better. You can always speak to a financial advisor, who can help you decide the best path at your stage of life.
6. Delay Social Security
You should rely on social security as your main form of retirement payment. Because of that, experts advise delaying social security for as long as popular. You can begin receiving social security at 62, but if you can delay that until 70, you can increase your monthly benefits.
Over the years of delaying social security, the income will add up quickly. It can also create an increased amount of survivor benefits for a spouse.
7. Long-Term Investments
One traditional way to increase your savings is through investments. But if you’re looking to save for retirement, you’ll want to choose the types of investments that have long-term returns, such as government bonds, large-cap stocks, and treasury bills.
The idea is to put money in that you can leave alone and see benefits in the future. An investment advisor can help you choose the best investment plan that helps you meet your goals.
8. Assess Risks and Inflation
All investing comes with risks, but when it comes to retirement planning, you want your risks to be relatively low. If you start investing early, you may be able to be a little more aggressive. But as you approach retirement, you’ll want to be a little more risk-averse.
Similarly, you’ll want to think about inflation and rising interest rates and how that might affect your retirement savings. Expect inflation to come in the future and save accordingly.
9. Set a Goal and Save
A major part of investing is goal setting. Putting money away is always a good idea, but it’s better to have a benchmark and understand why you’re saving. Determine how much you want to contribute a month or a year and set your saving strategy around that.
Experts recommend saving at least 15% of your household income a year or more if you can afford it. You also want to consider expenses like housing, food, and transportation when creating future savings goals.
10. Make a Withdrawal Strategy
Not only should you have a strategy for saving, but you should also have one for withdrawing your money. Consider how often and how much you will withdraw from retirement accounts. You’ll also want to know if there are penalties or fees associated with withdrawal.
You may not have to think about this right now. But as you near closer to retirement, it’s a good idea to create a withdrawal strategy, especially with a financial advisor.
Retirement Investment Strategies
It’s never too early to start preparing for retirement. If you want to be comfortable in your later years, you should begin investing while you’re still working. There’s no need to be intimidated by investing.
Learning the right investment strategies that work for you and your current finances is what makes all the difference. You can invest as much or as little as you like and in the way that you like. Use the money you make from investing to save for a comfortable retirement.
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