Most Americans know they should be saving more, but few of them are actually making plans to do it. This leaves them in a very difficult financial position after retirement, which they have retirement amount which is significantly less than what is required over the remaining part of their lives. Below are the three tips that can help you in achieving retirement savings goals.
Tips to Help Maximize Your Retirement Saving:
Index funds have low fees and track the major stock indexes like the broad S&P 500. Also, index fund provides the required diversification. Also, there are no hidden costs with index funds compared with mutual funds and even Warren Buffest suggest investing in index funds in its investment tips. One should go for index funds in a Roth IRA, an account that invests after-tax dollars — as opposed to pre-tax dollars, which is the case in a 401(k) account — is the winning combination for retirement, especially if you have time on your side. If one have a 401(k) from its employer, it’s likely full of mutual funds. But index funds can be a great investment for a Roth IRA as long as you have two things on your side; time & discipline
Go for Monthly contribution
Once you have your Roth IRA with an index fund, you now need some money. If you don’t have a lump sum to contribute to your Roth IRA, you’re not out of luck. Every year, set a goal as to how much you want to save and set your account to auto-contribute, and you won’t even have to think about it. Automatic payments means a certain amount of money is transferred from your checking account each month and into your Roth IRA. And you get to choose that amount. However, one should make minimum 10% of annual income contribution towards retirement. It will become a regular expense for you and by systematizing it and looking at it that way, you will be less likely to stop contributing to your retirement accounts. Also, it provides dollar cost averaging i.e. when the markets drop; you have greater purchasing power and can have more skin in the game. When the markets go up, now your Roth IRA is worth more.
Retirement savings requirement
One of the quintessential questions in retirement savings is just how much I will need? That’s a complicated question. Online retirement calculators can provide you an estimated amount of retirement savings required but retirement calculators aren’t perfect as they don’t take into consideration decreasing expenses later on in retirement, like travel, entertainment and your mortgage. So, the best thing to do is to get to corpus equivalent to 15 times your annual salary over the years or more for a comfortable retirement.
Above mentioned Tips to Help Maximize Your Retirement Savings can help you in achieving your retirement goals and can provide you require financial stability after the retirement.