Saving for retirement is one of the most important things you can do for yourself. With proper planning, you can enjoy the golden years of your dreams. But without enough cash, it could turn into a retirement nightmare. So how do you make sure you’re going to hit your target? Here are six of our best strategies and tips to ensure you’re getting the most bang for your retirement buck.
1. Keep Your Investment Expenses Low
The fees you pay for your investments are the silent killers of your retirement account. Without even knowing it, they could be costing you hundreds of thousands of dollars over the course of your career – or even millions! These fees are assessed by the asset manager or brokerage and come directly out of your gains.
The good news is that there are now numerous mutual funds, ETFs, and other investment products with extremely low investment expenses. Simply being aware of fees and seeking out lower-cost options can be one of the easiest ways to improve your long-term retirement investment performance.
2. Using The Right Retirement Account
It might seem like the easiest solution is just to get your paycheck and invest on your own. But if your job offers a 401k program, you should take advantage of this valuable investment. When investing in a 401k, contributions are withdrawn from your paycheck automatically from your pre-tax earnings. This offers the advantage of letting the larger pre-tax amount grow over time and also lowering your taxable income.
Even if you don’t work a typical job with a retirement plan, you may be eligible for other accounts like an IRA, Roth IRA, solo 401k, and more. IRAs offer some of the benefits of traditional 401ks (namely, tax-advantaged contributions) to everyone, while special self-employed IRAs offer additional advantages to those who are self-employed. These same folks are also typically eligible for a Solo 401k, which mimics the benefits of a 401k for entrepreneurs or self-employed individuals.
3. Don’t Leave Money On The Table
If someone was offering you free money, would you just say, “no thanks?” It sounds crazy, but millions of Americans do exactly this with their retirement savings. Many companies offer a 401k match, where your employer will match your contributions up to a certain level.
This essentially doubles your money and can be one of the best ways to quickly grow your investment principal. While it might require you to be more careful with your spending, ensuring you’re contributing up to your employer’s full match is one of the top tips for maximizing your retirement savings.
4. Diversify – In More Ways Than One
Intelligent investors know diversification is the key to long-term growth for your portfolio. But too many ignore the many different ways retirement savers can and should put their money to work. Yes, investors should ensure they own stock and mutual funds in various companies from different sectors and fields. But they should also diversify into other assets like bonds or real estate, which have numerous different categories themselves.
You can even explore alternative investments like cryptocurrency to ensure a fully diversified portfolio. As a result, you’ll be protected from overexposure should any particular industry or company struggle, and you’ll also have the opportunity to take advantage of gains from a variety of places, too.
5. Put Off Claiming Social Security Benefits
Social security income is an integral part of many folks’ retirement plans. Many claim their benefits as soon as possible, at age 62, but may not be aware of how much money they’re giving up over the long term by not waiting. Depending on what year you were born, your social security payments at age 62 might be just 70-75% of what you’d receive if you’d waited until age 67, the full retirement age.
This is likely thousands of dollars a year you’re giving up and tens of thousands throughout your retirement. Of course, not everyone can wait. But those who have the ability can save themselves a bundle.
6. Start (or Increase Your Contributions) Now!
So much time and energy is spent finding the best asset allocations, picking the best brokerage, and other factors that it can be easy to forget the most important thing you can do to get more back for your buck. That’s simply contributing as much as you can, as early as you can, and letting the magic of compound interest do its work. Simple math will show how much more you’ll need to contribute as you approach retirement compared to the relatively little you’d need if you saved along the way.
If you’re stressing out about your late start (or you haven’t begun saving at all), don’t panic. The most important thing you can do today is to start saving and investing or increase your contributions if possible. With even average investments, your money will grow over time and get you closer to your financial goals.
There’s More Than One Way To Boost Your Finances For Retirement
We all have different financial situations and goals. Some are working at an average job, socking away money in our investment accounts. Others are entrepreneurs or other business owners, taking charge of their own financial future with a solo 401k or other product.
But no matter who you are or what you do, these valuable tips can help turbocharge your retirement savings. So keep these in mind to get started, get back on track, or get closer to the golden years of your dreams!
