Basic Steps To Prepare Financially For Retirement
Let Money Work For You Instead Of The Other Way Around!
Most people probably never give much thought to your retirement so; here’s what you need to prepare financially for retirement.
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You work hard during the day, go home, relax by watching television or reading a book, and repeat the next day.
Unfortunately, this is not the way that retirement works.
If you want to enjoy it after working 40+ years for a company or your family, you need to plan for it.
Read on as we show you how to prepare financially for retirement.
Apply These Best Tips To Prepare Financially For Your Retirement
Retirement Savings Accounts
Retirement savings accounts work by giving money to a person who invests it.
Over time, the investment gains interest, and the money inside the account multiplies, saving more money than was initially put in.
There are several retirement savings accounts, but the most common are IRA and 401(k).
They work basically in the same way; however, there are a few key differences.
For example, an IRA can hold almost any type of investment contained within a 401(k).
In addition, IRA limits for individuals are much lower than 401(k)s.
Important Factors To Consider
There are several factors that you need to consider when choosing your retirement savings account.
Some important ones include:
- What type of investments the account allows?
- How difficult it is to open and fund an account?
- Whether or not there are fees associated with an account?
- What kind of tax benefits you receive?
Set Money Aside
Once you have decided on an account, you need to determine how much of your income you want to put towards retirement savings each week or month.
It is recommended that younger people put away at least 10% of their annual salary into a retirement account, while older individuals should probably aim for around 20%.
Once you have set money aside, you need to decide how much of that money will go into stocks vs. bond funds or other income-producing investments.
Invest Your Money
Depending on what kind of retirement savings account you choose, there are several options for investing your money.
The most common types of accounts offer either mutual funds or individual stocks as investment options.
If you decide to invest in mutual funds, the money you send to the retirement savings account will be sent into a large pool of money that an investment manager then invests into other areas.
If you choose individual stocks, your money goes directly into company stocks that hopefully increase value over time.
Before You Withdraw
It is essential to know that you need to meet specific requirements to withdraw money from a retirement savings account.
In most cases, the total amount of the account needs to be left in for at least five years before you can make withdrawals without penalty.
Spread Your Exposure To Prepare Financially For Retirement
In general, it is a good idea to have multiple retirement savings accounts from different companies so that if one company goes bankrupt, you will not lose your entire portfolio.
For example, if you have $100,000 in one account and $120,000 in another, losing the first account won’t affect your second account at all.
Plan Your Next Move
So now that you know how to plan for your retirement, there are a couple of things left to do.
First, sit down and research your options to find an account that works for your needs.
Then, once you have chosen an account, use the savings calculator to determine how much money you need to prepare financially for retirement and to retire comfortably.
Remember to update your will and to nominate the best probate attorney you can find to handle your affairs as you prepare financially for retirement.
Finally, set up automatic contributions so that every month or week, some of your paychecks go towards retirement savings until one day you wake up and realize that your money is working for you instead of the other way around.
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