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Regardless of your age, it’s never too early to plan for retirement. Yes, we’re talking to you, teens and 20-somethings! The day you’re done working may seem very far away right now, but you don’t want to be caught unprepared for when that day comes (and it might come sooner than you think!).
Around 64% of Americans expect to have $10,000 or less in their retirement savings account. That’s because many Americans falsely believe that social safety nets like Social Security benefits will be enough to take care of them once they stop working. Social Security benefits have a shaky future in the U.S. and for most people in the country, these benefits won’t be nearly enough to actually live on.
This is why it’s more important than ever to save money while you’re still working and able-bodied. Keep reading below for some practical tips on preparing for your retirement.
Step 1: Open a retirement savings account
The first step to prepare for retirement is to open a savings account specifically for your golden years. A retirement savings account will make you feel accomplished as you watch your account grow thanks to the power of compounding interest as time goes on.
There are many different varieties of retirement accounts you can choose from. If your current employer offers matched contributions in a 401(k) program, it’s a good idea to take advantage of that plan which will automatically redirect some of your paycheck into your account. As a result, your savings will grow faster.
If your employer doesn’t offer any kind of retirement savings, consider opening a retirement account through your bank like an IRA.
Step 2: Consider your timeline and your target age for retirement
Your strategy for growing your retirement savings should reflect the time you have until your retirement actually happens. For those who are young and still in the early stages of their career, you have considerably more time to withstand market instability so your portfolio will bounce back – even after a market downturn. If you’re getting close to retirement, it makes more sense to take a more conservative approach to your retirement – after all, you don’t want your retirement money to all go down the drain if the market takes a turn for the worse.
Step 3: If you’re about to retire or you’re retired, think about getting a reverse mortgage
A reverse mortgage is an excellent way to get more money for day-to-day expenses during your retirement. Before opting for one of these unique financial product, check out the reverse mortgage qualifications to see if you’ll be approved.
You’ll need to be aged 62 years of age or older, live in your home permanently, and own substantial equity in your home to be eligible.
Step 4: Choose the assets that will make up your portfolio
When you’re ready to invest some of your money for retirement, you’ll need to choose what assets to add to your portfolio. You can choose from stocks, bonds, exchange-traded funds (ETFs), and real estate investment trusts. The only rule you should consider following when it comes to investments is: diversify, diversify, diversify. You don’t want all your eggs in one basket because if the market takes a hit, you want to spread the impact across a variety of investments to give yourself a better chance of weathering the storm.
While you can hire a financial advisor to manage your investments on your behalf, you can also learn how to invest yourself. Or, you can rely on a robo-advisor.
Step 5: Get a side hustle during retirement for extra money
Although many people choose their retirement as a time for an extended vacation, sometimes vacation gets boring. Many retirees and seniors take on a small side job or volunteer to socialize and make a little extra money. You might even want to open up your own small business and pursue a side passion.
Here are some senior-friendly job ideas if you need a place to start:
- Poll worker
- Tax preparer
- Sports coach
Conclusion: Prepare for your retirement, one dollar at a time
With these tips, you can ensure that your retirement is enjoyable and peaceful. Remember, start saving early so you can fully take advantage of your golden years and the slower pace of life.