Saturday, December 7, 2013

Tools and Tips to Make Saving for Retirement Easy

With all of the recent changes in social security and government policy concerning retirement, many people are placing renewed importance in organizing themselves for their retirement to ensure that when ready, they can retire comfortably and with few financial worries. Saving for retirement during an economic crunch may seem particularly difficult, but there are many things you can do even now to safeguard your retirement. Consider using some of these tips to plan your retirement:


Understand your situation.


Every person has a unique set of circumstances that characterize their work and personal lives and that will necessarily affect their retirement plans. Before you attempt to draft a concrete retirement strategy, you must have a complete picture of your situation. Keep in mind that it is estimated that most people will need to have between seventy and ninety percent of their current, pre-tax salary available every year during retirement to maintain their accustomed standard of living. How many years do you have before you would like to retire? How much money will you need to sustain your lifestyle? Will you have any dependents to care for at this time? How will you cover medical costs and emergencies? Think about the whole picture before deciding on a plan of action for your retirement.


Know what options your employer can offer you.


Many employers offer their employees the options to participate in a 401(k) retirement plan whereby a portion of the worker’s earnings is automatically deducted from the paycheck to be placed in a separate retirement fund that is then matched in some capacity by the employer. These plans are a great saving tool, essentially providing you with free money from your employer that will increase your retirement savings and significantly affect the amount of interest you will earn on your investment. The longer you contribute to a 401(k) plan without touching the money, the higher the interest earned and the more money overall you save for your future. Some companies have their own types of retirement savings plans, all of which still use similar devices to increase your savings. If your employer does not currently offer any savings options, discuss the possibility with them. Because of the investment capacity of retirement plans for companies, beginning a retirement program is an attractive option for them as well. Work with your employer to find a solution that is beneficial to you both.


Make your own IRA.


An IRA is an Individual Retirement Account that anyone can create and place up to $5,000 in when under 50 and even more when older than 50. These accounts offer lucrative interest rates and many tax benefits to enrollees. There are two main types of IRAs you can open that affect the amount that is withdrawn every month and the tax benefits associated with the accounts - a traditional IRA or a Roth IRA. The primary differences between these types involve the way the investment is taxed before, during, and after deposit and withdrawal, with Roth IRAs being somewhat more flexible than traditional IRAs. For more information on IRAs, see CNN Money.


Invest.


In addition to these retirement saving options, you should also look into common investment tools like stocks, bonds, and CDs. These options vary in the amount of risk and profit they offer investors and should be chosen based on these factors and the circumstances of the individual investor involved. Most of these options are for long term investment, meaning the money involved will be unavailable for years after the initial investment, and thus should only be used when you are sure you will not need this money any time soon. If you already own stocks, you can look into covered calls. What are covered calls? They are an option that allows you to capitalize on the value of your stocks continuously without selling ownership. You can then use this money to make further investments that can increase your overall investment portfolio.

Even if retirement may be decades away, creating a retirement plan now is the best way to ensure that you will be ready to comfortably retire when the time comes. Take advantage of your employer’s retirement plan options, open your own IRA, and invest in a variety of manners to create a strong retirement plan for yourself and your family. For more tips, see the US Department of Labor.



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