You probably have a 401(k), a lot of people do, but did you know that in past years, of those who had 401(k) coverage available, 25 percent chose not to participate. That’s just ridiculous and unnecessary! So, being concerned for your financial future - here are ten ways you can prepare for retirement!
Top Ten Ways to Prepare for Retirement
1 Know Your Retirement Needs
Retirement is expensive. Review your finances and be sure you understand your financial future. Experts estimate that most would need near 80% of pre-retirement income to maintain the same lifestyle.
2 Find Out About Your Social Security Benefits
Social Security pays the average retiree about 40% of pre-retirement earnings. Call the Social Security Administration at 1-800-772-1213 for a free Personal Earnings and Benefit Estimate Statement (PEBES).
3 Learn About Your Employer’s Pension or Profit Sharing Plan
If your employer offers a plan, check to see what your benefit is worth. Most employers will provide an individual benefit statement if you request one. Before you change jobs, find out what will happen to your pension. Learn what benefits you may have from previous employment. Find out if you will be entitled to benefits from your spouse’s plan. For a free booklet on private pensions, call the U.S. Department of Labor at 1-800-444-3272.
4 Contribute to a Tax-Sheltered Savings Plan
If your employer offers a tax sheltered savings plan, such as a 401(k), sign up and contribute all you can. Your taxes will be lower, your company may kick in more, and automatic deductions make it easy! Over time, deferral of taxes and compounding of interest make a big difference in the amount of money you will accumulate.
5 Ask Your Employer to Start a Plan
If your employer doesn’t offer a retirement plan, suggest that he/she start one. Simplified plans can be set up by certain employers. For information on simplified employee pensions, order Internal Revenue Service Publication 590 by calling 1-800-829-3676.
6 Open an IRA
Almost all Americans can open an IRA if they or their spouse has earned income. You can put $3,000 a year into an Individual Retirement Account (IRA) and delay paying taxes on investment earnings until retirement age. If you don’t have a retirement plan (or are in a plan and earn less than a certain amount), you can also take a tax deduction for your IRA contributions. Consider both the traditional IRA and Roth IRA.
7 Don’t Touch Your Savings
Don’t dip into your retirement savings. You’ll lose principal and interest, and you may lose tax benefits. If you change jobs, roll over your savings directly into an IRA or your new employer’s retirement plan - don’t take the cash.
8 Start Now, Set Goals, and Stick to Them
Start early. The sooner you start saving, the more time your money has to grow. Put time on your side. Make retirement saving a high priority. Devise a plan, stick to it, and set goals for yourself. Remember, it’s never too late to start. Start saving now, whatever your age.
9 Consider Basic Investment Principles
How you save can be as important as how much you save. Inflation and the type of investments you make play important roles in how much you’ll have saved at retirement. Know how your pension or savings plan is invested. Financial security and knowledge go hand in hand.
10 Ask Questions
These tips should point you in the right direction, but you’ll need more information. Talk to your employer, your bank, your union, or a financial adviser. Ask questions and make sure the answers make sense to you. Get practical advice and act now. I said, ACT NOW!
11 Bonus: Put Away Money Each and Every Week (NO EXCEPTIONS)
It’s has been shown the reliability, stability, and financial impact you can experience simply by putting money away each and every week. The steady contributions will strengthen your portfolio and help you smooth over when the funds are rough. Better yet, if you give away the same 6% each week (or whatever you choose) - you will soon not even notice it’s missing! It is much more difficult to put away large chunks of money. It’s also not as effective.
Well, now it’s up to you. Even if you are young - even if you are still in college! Start putting away even the tiniest, most insignificant, measly little part of your income toward retirement. Drink two less beers this week and put that money in a Roth IRA if you don’t have a job that offers you the 401k benefits. Even the smallest contributions will begin to earn money in your favor. The future starts now, so start planning!