Saving for retirement is one of the most important things you can do, but it isn’t something everyone does right. Unfortunately, 25% of Americans have no retirement plan at all. That means you’ll be out of luck in the future when it’s hard for you to work.
Luckily, it’s never too late if you want to learn how to save money for retirement. Keep reading to learn the best way to save for retirement.
- Fund an IRA
The IRA is one of the most common ways for individuals to save for retirement. An IRA is a pre-tax investment account that you send money to from your paycheck. It earns money every year and becomes available once you reach retirement age.
Since you’re withdrawing this money in the future when you have less income, you’ll have fewer tax burdens with drawing on your IRA. That means you’ll save money this route instead of investing your cash with post-tax income.
- Create a 401k
A 401k is another standard investment vehicle for employees who work at companies. Like an IRA, you fund a 401k with pre-tax money. However, you’ll be invested in other markets than an IRA touches.
One great thing about a 401k is many employers offer a 401k match. If you put aside the maximum match your employee provides, you can double the amount you have in your 401k and drastically accelerate your investment savings.
- Use Catch-Up Contributions
While an IRA and 401k are great to contribute to, you can’t send an unlimited amount of money to these accounts. You can only contribute a certain amount of money every year. That means you’ll be far behind if you don’t open these accounts early.
However, you do have more options if you’re over the age of 50. Once you reach this age, you can contribute more than the minimal amount that other people have. Doing this will help you catch up and set yourself up for a better retirement.
- Buy Dividend Stocks
Typical stocks are great, but they don’t work well if you want to generate income. They’ll go up over time, but your investments will eventually dwindle as you withdraw investments in the future.
Dividend stocks work a bit differently. A dividend is a payment based on the profit a company makes. Every investor gets a dividend payment on a schedule.
There are many public companies known for reliable dividends. You can use these companies to generate a passive income on top of your regular investment withdrawals.
- Reduce Your Utility Expenses
There are many utilities you can’t do anything about. You only have one option for electricity, water, sewage, and other essentials. However, that isn’t the case for everything.
You can often look for better deals like phone plans, insurance, and other ordinary monthly expenses. Call your providers to see if they can work with you on your monthly cost. Start looking at alternatives to reduce your monthly payments if nobody can offer a better deal.
Every dollar you save here is extra money you can invest.
- Use High-Interest Savings Accounts
While you want to invest as much money as possible, you don’t want to be left without savings when you need your money the most. You’ll undoubtedly run into unexpected expenses in your life. You don’t want to scramble to get the cash you need.
However, traditional savings accounts don’t offer much savings. But you do have high-interest account options as an alternative. Put your savings into these accounts to earn extra money on your emergency cash.
- Get a Financial Advisor
It’s not easy to create a retirement plan when you don’t have much time or aren’t experienced with money. The good news is that you aren’t on your own. You can either look online for information or hire investment advisors.
Working with a financial advisor can help you create a roadmap for your future. They’ll help you determine how much money to save and invest. You’ll also figure out how much money you need to retire later in your life.
- Retire a Little Later
Are you worried that you won’t have enough money when you retire? If so, you don’t have to retire at the minimum retirement age. You can continue working and investing money until you feel it’s safe.
On top of that, you can increase your monthly payments from social security when you do this. This will add to your investment income and give you a more comfortable life when it’s time for you to start settling down. You won’t need to worry as much about your investment income holding you over for the rest of your life.
- Automate Where Possible
While some of your investments like IRAs and 401ks are hands-off, not everything is that way. If you invest your paychecks after they hit your bank account, you must manually move that money to your investment accounts.
Luckily, investment tools are much easier to use these days. You have the ability to connect your bank accounts to these investment services. Set up an automated transfer to invest every month to make sure you never miss an investing opportunity.
Start the Process to Save for Retirement Today
You only have so much time to save for retirement, so you can’t wait another day to start taking action. Luckily, you have plenty of options that will help you put away money for the future. If you want to know the best way to save money for retirement, keep the tips above in mind to start taking action today.
Head back to the blog for more investing tips that will keep you on track for financial success.
