Earning enough money to retire is difficult enough; figuring out how much to save and where to put your retirement fund could be just as tricky. Here’s how you can create a financial plan for retirement.
1. Start Saving!
You’re never too young to start saving. Retirement won’t always be your top priority, of course. You have many options for what to do with your disposable income.
Maybe paying off your student loans is your first priority, or maybe it’s saving for the down payment on a home. Putting money aside for something important is always wise, even if that money doesn’t end up in a retirement fund. Saving money instead of purchasing luxury items is never a bad idea.
2. Consider Your Savings Options
There are many places you can put your money for retirement. Here are the key ones:
- 401(k): If you’re employed in a salaried position, a 401(k) is a great place to start. You can set up automatic withdrawals from your paycheck. Many employers offer to match a portion of their employees’ contributions. Your investment gains are also tax-deferred.
- Solo 401(k): Self-employed individuals can use a solo 401(k) and reap many of the same benefits.
- Individual Retirement Account: There are several types of IRAs available. These include traditional IRAs, Roth IRAs, SEP IRAs and Simple IRAs. The best IRA for you depends on your employment status and the taxes you pay. You can discuss your options with a financial planner.
- Savings Account: Opening a savings account is a great way to start saving. It’s always good to have a rainy day fund. However, it’s probably not your best long-term option for retirement.
- Investments: Investing is a great option to increase your wealth. Something like a diversified mutual fund offers little risk, so that’s a good option. However, there’s always some risk with investing, so a mutual fund — or any other type of investment in the market — shouldn’t be your only retirement fund.
3. Make a Plan and Stick to It
How much of your earnings should you save? The answer is different for everyone. For most people, saving 10%–15% is a healthy target. (But if you want to save more, go for it!)
What’s most critical of all is sticking to your plan. Sometimes unexpected expenses are inevitable. Maybe you have to change your plan because your car broke down, your basement flooded, you lost your job or you have a medical issue. Urgent matters will sometimes force you to put retirement at the back of your mind. However, you shouldn’t divert your savings for a dream vacation or luxury item.
4. Get Personalized Advice
Only about half of Americans have figured out how much they need for retirement. If you’re thinking about retirement savings, you’re already on the right track. But the right plan for others may not be the right plan for you.
Vectra can help you with your retirement goals. Contact a Vectra Bank professional today and find out how we can help you craft the perfect retirement plan for you.
