This article was contributed to Leisure Freak by writer Samantha Higgins.
Few people build enough wealth to fully retire on time. What usually ends up happening is that seniors have to go back to work on a part-time basis. Starting your retirement by investing as early in life as possible can help you avoid this situation. In addition, there are more smart money moves you can make to build a stronger retirement fund.
Create a Stream of Disposable Income
Your first step in retirement planning should be to eliminate as much debt as possible to create a steady stream of disposable income. If you’re in your 20s, you probably don’t have much debt, and eliminating it may be a little easier.
Regardless of your stage in life, you should do what you can to pay off unsecured debt, such as credit cards and personal loans. The two best methods for paying down debt are to pay off the accounts with the highest interest first or to pay off the accounts with the largest sum owed. Either method can be effective in gradually reducing debt.
Start a Savings Account
It might seem counterproductive to store half of your disposable cash in a savings account, but those savings will help you out later. The last thing you want to do is withdraw or borrow against your retirement savings. Instead, build up a savings account that’s equivalent to six months of living expenses.
This will be enough to cover any financial emergency that might occur. If you use these funds, be sure to build them back up swiftly. The money in your savings account should be used for household emergencies, such as replacing a broken water heater or installing a new roof. Use this account to pay auto expenses, buy big-ticket items, and cover vacation costs as well.
Know Your Retirement Needs
Even when you’re still young, you should have some impression of your retirement age living expenses. Do you plan to keep your house or will you downsize? The answer could determine how much your housing will cost later in life.
If you want to relocate to a tropical location, it could be worthwhile to research how much money to retire in Mexico or the Caribbean. Don’t forget to estimate your costs for energy, water, and gas consumption.
Add in the costs for cable TV, internet, and phone service. Finally, calculate your costs for groceries, dining out, and entertainment. All of these costs should be considered to give you a realistic impression of your retirement financial needs.
Choose a Broad Range of Investments
Talk to your financial advisor about starting a self-directed IRA. This is a retirement account that will allow you to add nontraditional investments. In addition to stocks, bonds, and mutual funds, your self-directed IRA can include real estate, precious metals, artwork, and other types of investments. A more diverse investment portfolio will stand up better against harsh economic times, such as a recession.
Take Advantage of Free Money
If your employer offers a pension plan, 401k, or a similar type of retirement plan, be sure to take advantage of it. The money your employer contributes to your retirement account is free to you.
This allows you to double your contributions and build retirement wealth faster. Be sure to ask about the limits on contributions so you can take full advantage of these opportunities. When you retire or leave your employment, you can roll those funds over into your separate IRA.
Review Your Investment Strategy Every Year
Life changes through the years so be sure to meet with your financial advisor every year to review your investments. This is the time to determine if you need a more aggressive investing strategy or if new assets should be added to your portfolio.
If you plan to finance a child’s college education, start a business, or make other significant life changes, your advisor can offer suggestions for the best methods of financing those goals. The advice offered by your financial advisor will help you avoid sabotaging your investment wealth.
Bottom Line
Be sure to stay in touch with your financial advisor or planner. They can help you learn more about investing and create a solid plan for staying on track with your goals. They can also help you learn more about the different retirement plans that will be available to you.
Thank you Samantha Higgins for contributing this informative article to Leisure Freak.
Author Bio:
Samantha Higgins is a professional writer with a passion for research, observation, and innovation. She is nurturing a growing family of twin boys in Portland, Oregon with her husband. She loves kayaking and reading creative non-fiction.