All of the best investment strategies in the world depend on
one thing, saving. Prioritizing and setting aside money for retirement is the
first step toward meeting your financial goals in retirement.
So why don’t more people do it? Two reasons: They don’t
think they will ever retire, and they don’t think they can afford it. We have
news for you. You probably will, and you probably can. Here are some tips for
making it so.
MAKE SAVING AUTOMATIC
It is recommended you save 15 percent to 20 percent of your
income for retirement. That probably sounds daunting, but it is achievable.
Consider raising your contributions by 1 percent per year.
One way to make this easier is to commit to saving before
you ever see the money hit your account, this gives you an important
psychological advantage. Tools such as automatic deposit into a savings account
can lessen the temptation to splurge.
It is also a useful budgeting tool. If you consider a
portion of your income to be “locked,” then you can make key decisions about
home mortgages, car purchases and vacations.
TAKE ADVANTAGE OF EMPLOYER CONTRIBUTIONS
You’ve heard us say it before. You will hear us say it
again. It will be true every time. If your employer offers an employee match
for your 401(k) or 403(b), take advantage of it.
Avoid the temptation to procrastinate and put it off.
Generally speaking, you can make these changes any time of year; you don’t have
to wait for open enrollment. If you are not enrolled in your company’s plan, or
are unsure of how to adjust your contribution, reach out to your human
resources team.
START THINKING ABOUT TAXES NOW
Especially if you are a young worker, you may be heavily
invested in tax-deferred accounts. This can be a real problem when required
minimum distributions (RMDs) hit and you are stuck with a high tax bill.
This might sound like a good problem to have. If you are
paying a lot in taxes, that means you have plenty of money squirreled away,
right? We’ll tell you this: Never once has a client came to us in retirement
and said taxes are not a big deal. Keep in mind, this is the money you will
have to live on some day.
If you think adding an extra 1 percent of your income to
savings is daunting, try paying an extra 5 percent, 10 percent or 15 percent in
taxes! You want to make sure your retirement savings are diversified, not only
by asset class and company risk, but by tax liability.
ENGAGE A SEASONED ADVISER
In addition to providing personalized advice, your adviser
can also be the kick in the pants you need to start getting serious about your
retirement. You’d be surprised how much more diligent people get about their
saving when they have to look at the person who knows everything about their
finances straight in the eye.
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