5 Tips to Saving For Retirement from a Financial Advisor
By, Clint Haynes
Saving for retirement is a financial responsibility that nobody can afford to overlook. Unfortunately, millions of people will reach their golden years with far less money than they will truly need.
With the economy and markets in flux, when might be the best time to start saving for retirement? You might be surprised!
We receive many questions about when to start saving for retirement. Then there are those who worry that it might be too late to save for retirement.
Contents
- 5 Tips to Saving For Retirement from a Financial Advisor
- 5 Retirement Saving Tips That are Easy to Implement
- #1 – Start saving for retirement early.
- #2 – Increase retirement contributions every year.
- #3 – Diversify the types of investments in your retirement account.
- #4 – Rebalance your investments annually.
- #5 – Ask for help from a financial advisor.
- When is the Best Time to Save for Retirement? – Takeaway
The days of relying on just social security and a pension are long gone.
By learning about the types of investments and boosting your financial investment education, even if you got a late start, you can improve your retirement nest egg.
Here are five top tips to help you start saving for retirement so you can get there confidently.
5 Retirement Saving Tips That are Easy to Implement
#1 – Start saving for retirement early.
It sounds a little obvious but the earlier you start saving, the easier it will be to grow a sizable nest egg. But even if you haven’t started saving for retirement yet – it’s best to start immediately.
The answer to “When is the best time to save for retirement?” is now!
The power of compound interest takes a while to kick in so the earlier you can start, the more you’re going to have at retirement. Even delaying saving for retirement from age 25 to 30 can equate to hundreds of thousands of dollars by the time you reach 65.
“Compound interest is the most powerful force in the universe.”
“Compound interest is the greatest mathematical discovery of all time.”
These quotes are from none other than Albert Einstein. I’d say that’s a pretty ringing endorsement for compound interest and hopefully encouragement to get started saving more today.
Bonus; Best Investment Advice for Millennial Women (and Men)
Even if you’re in your 20s, it’s never too early to start planning for your future. Also, even if you’re in your 50’s, it’s never too late to get started.
#2 – Increase retirement contributions every year.
Whether you’re starting to save for retirement earlier or later, it’s helpful to have a mindset to increase retirement contributions.
Once you are in the habit of saving for retirement, you will almost certainly keep it up. You shouldn’t simply leave it at that, though, as increasing your contributions each year will only get you there quicker.
For younger savers, the fact that your salary is likely to increase over time will only further boost your future savings. Moreover, the fact you’ll be earning more means that the extra 1-2% increase every year won’t even be noticed.
Have a greater and greater percentage of your income diverted into your retirement account and your ultimate savings will grow by tens of thousands of dollars.
Free tip: Get Your 401(k) analyzed for free to find out if you’re getting the best returns!
#3 – Diversify the types of investments in your retirement account.
You’ve heard the saying “don’t put all your eggs in one basket” many times throughout your life. However, it’s absolutely vital when dealing with retirement savings. Diversification is pivotal.
If your retirement is tied up in just one mutual fund or stock (remember Enron?), you’ll be incurring an enormous amount of risk should any problems occur. Conversely, a diverse portfolio of stock and bond mutual funds will put you in a much safer and comfortable position.
Your 401(k) might also offer what are called target date funds. These typically work out great for most people because all of the diversification work is already done for you.
#4 – Rebalance your investments annually.
Saving for retirement is an ongoing challenge, which is why you can’t afford to overlook the need to help your portfolio over time. An annual investment rebalancing act should be top of mind and most 401k’s make it pretty easy. If you’re in a target date fund, it will be done automatically for you.
Rebalancing ultimately means taking stock of your portfolio once a year to ensure that it follows the same allocation you initially set out with. For example, if you had a 50-50 share between stocks and bonds a year ago, the balance will now be out of sync because one of the two probably did better than the other.
If you want to avoid allowing your portfolio to become riskier, completing the annual rebalancing act is vital. Otherwise, you could have the same risks as not diversifying in the first place.
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#5 – Ask for help from a financial advisor.
They say that a problem shared is a problem halved, and those sentiments can ring true when it comes to your retirement saving endeavors. Support is available, so take advantage of it. There are many reputable financial advisors to guide you with your saving for retirement journey.
Additionally, there are a number of websites that will provide you with plenty of information and your human resources benefits department can also help and answer many of your questions.
If you want to get started now saving for retirement now, but lack much money, there are ways to invest with little money with a robo-advisor.
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FAQ
Compound returns mean that if you invest $1,000 and earn 7%, then at the end of year one you have $1,070. Then the next year you earn 7% on $1,070 and you have $1,145. And so on. Each year your money makes more money and grows exponentially. The longer you keep your money, the more it grows.
It is never too late to start saving for retirement. If you start later, it means that you’ll have to save more money to reach your retirement goals – since you have a shorter time until you hit retirement age. But, don’t let that stop you from starting to save and invest for retirement.
When is the Best Time to Save for Retirement? – Takeaway
Saving for retirement is an immensely important part of your life, and it’s crucial for protecting your future for you and your family. Without it, the fear of running out of money in retirement can feel insurmountable.
Even if you’re in your 40’s or 50’s it’s NEVER too late to satrt saving for retirement.
Keep each of the five points above in mind when saving for retirement and be sure to set up reminders on an annual basis. It may feel like a lot of effort now, but it could be the key to making your golden years actually feel golden.
Related
- Risk Less and Prosper – Is Conventional Investing Wisdom Wrong?
- Retirable Review – Low-cost financial advisors for those over age 50
- Too Scared To Retire?
- How To Catch-up On Your Retirement Savings
- Best Ways To Withdraw From Retirement Accounts
By, Clint Haynes is a Certified Financial Planner® and Financial Advisor in Kansas City, Missouri. He is also the founder and owner of NextGen Wealth. You can learn more about Clint at his website NextGen Wealth.
Disclosure: Please note that this article may contain affiliate links which means that – at zero cost to you – I might earn a commission if you sign up or buy through the affiliate link. That said, I never recommend anything I don’t believe is valuable.
