Guest post from Charles Tran at www.creditdonkey.com:
We hear the dire predicaments from politicians and financial advisors alike: we simply cannot rely on Social Security to get us through retirement. We all know we must begin saving in order to guarantee a solid financial future after retirement, but not many of us know how to get there.
Today is the day to begin saving for your future. Thankfully, building, preserving and saving our wealth can be accomplished by following a number of strategies:
• Don’t save tomorrow what you can today – In the best case scenario, you start to save for retirement the moment you land your first job out of college. However, not many 20-somethings are thinking of retirement. The reality is that the sooner you begin saving, the better off you’ll be, even if you are able to only save small amounts. Remember: the key to building wealth is time. The more time you have, the more you can put the power of compound interest to work for you. There is a reason Albert Einstein said, “The most powerful force in the universe is compound interest.”
• Remain realistic when setting retirement goals – Regardless of what a financial advisor may tell you, only you know what you can comfortably afford to give to your retirement account each month. For example, you do not want to sacrifice your credit card payments to store away retirement funds, as the financial cost would not be wise. Setting unrealistic goals that you simply can’t keep is the quickest way to ensure your retirement plan will go down in flames.
• Absolutely take full advantage of your employer’s match – If you only employ one retirement strategy, then it should be to always match your employer’s maximum retirement contributions. The amount of money your employer will contribute to your retirement plan is essentially free money. If you neglect to contribute the maximum employer contribution, you are really burning free money for your golden years.
• Think 401K or IRA for your retirement plans – Both 401K plans (usually through your employer) and IRAs (individual retirement accounts) offer huge tax breaks. Put your money where it can grow without being overtaxed so you can reap the rewards of saving for retirement.
• Concentrate on stocks and go easy on the bonds – Generally speaking, stocks are usually a smarter option for younger savers who have a higher risk tolerance. In fact, stocks achieve better over long periods than nearly any other type of investment. Bonds are a challenge, though an option, especially for those near retirement. Those who are on fixed-income and vested in bonds will be sensitive to inflation.
• Dip into your taxable accounts once you hit retirement – The best way to make sure your retirement money will last is to draw from your taxable accounts and leave your tax-advantaged accounts alone so they can continue to earn you compound interest until the last possible minute.
• Consider the advantages of working part-time in retirement – If you are quickly nearing retirement age without a substantial nest egg, consider taking a part-time job. Making just a small amount of money can mean your retirement accounts will go that much farther. Do something you love or find something that interests you and earn some part-time cash to put toward your living expenses.
The prosperity of your golden years starts today. The sooner you begin to store away money for retirement, the larger your nest egg will grow.
If you are seeking investment help, look at the video here on my services. If you are seeking a different approach to managing your assets, you have landed at the right spot. I am a fee-only advisor registered in the State of Maryland, charge less than half the going rate for investment management, and seek to teach individuals how to manage their own assets using low-cost indexed exchange traded funds. Please call or email me if interested in further details. My website is at http://www.rwinvestmentstrategies.com. If you are new to investing, take a look at the "DIY Investor Newbie" posts here by typing "newbie" in the search box above to the left. These take you through the basics of what you need to know in getting started on doing your own investing.