Do you plan to retire? Of course you do! But… how do you know if you are preparing correctly for those days of little income?
When saving for your retirement there are some important steps to consider. Review the following list and get going on any area you feel hasn’t been addressed in your current financial picture.
1. Start saving as early as possible. For every dollar you save in your twenties, it is worth multiple dollars saved in your forties. Basically, whatever age you are now… start saving as much as you can in your budget for your retirement. Due to compounding interest, money saved early in your career can have significant impact to when you can retire and how much money you will have.
2. Decide how much you need. Honestly, when you retire, what percentage of your income will you need to live happily on? Most can decide on something from 60% to 80% of your current income, depending on your plans. Take some time to evaluate your lifestyle changes as well as your needs, long before you retire.
3. Don’t borrow from your retirement savings – no matter what! That money is sacred and difficult to regain if lost. There are also hefty penalties if you use the money before you retire, so sneaking some of the money out early will not only lose you the valuable advantage of time, but also a large chunk of your money as well.
4. Maximize the tax savings. Money that you place in retirement funds not only gets to build tax free, it can also reduce the amount of income taxes you pay. For specific information on your situation, contact a tax accountant.
5. Consider the impact of Social Security. Although many fear that the Social Security fund will collapse, imagine the serious consequences if that actually happened. Most likely the money taken from your paycheck for Social Security will still be available to you when you retire. Use the statement you receive from the government each year as part of your retirement planning calculation.
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