Over the years, retirement planning has not changed; you work, save, and then retire. However, while the phases are still the same, today’s people face some difficulties that the previous age group didn’t have to be concerned about.
To begin with, the life expectancy is now longer, which means you will need to save money that will last longer, possibly till your nineties. Also, bond yields are lower than before, so you cannot purchase a few fixed-income mechanisms and double your returns. And to make matters worse, there is a health calamity because of the Coronavirus pandemic.
And to add more salt to the wound, companies are moving away from the defined pension benefits, which assure you a specific amount of money when you retire. So, how can you grow your retirement fund the way you always wanted?
Invest properly in your retirement account
Setting up a retirement account can be very easy, and you fail to invest in it conventionally. So, you will want to check in your account regularly and see how your portfolio is expanding. And if you notice zero changes in the portfolio, it is definitely time to make some adjustments.
According to various financial experts, changing how you invest in your account is a good idea. Besides, you can also switch to a low fee asset, which is a good option. You can also consider becoming more aggressive for higher returns if you are still younger and okay with the extra risks.
To achieve that, you will first need to compare the available options, look at some of the best retirement investments offered, and then compare them by looking at the returns and fees.
Avoid lifestyle inflation
If you are in your early thirties and started saving, there is still much time for you to catch up. This is the time to kick your career into top gear and search for promotions and opportunities to push you from making entry-level salaries to more comfortable earnings. The good news is that as you advance your career, you will be increasing the amount you save, particularly if you avoid lifestyle inflation.
Therefore, if you get that promotion that you always wanted, instead of celebrating and buying yourself a big car or taking a vacation, why don’t you bump up your savings rates? An excellent way to guarantee successful saving is by ensuring that you are taking good care of yourself. So, even if you get an increase of 3% on your living costs, you put 2% of it into your retirement and one percent in your pocket.
Deposit your tax refund in an IRA
Most people don’t need their tax refund immediately, so putting it into the IRA can really help you get one step nearer to maxing it out. And regardless of how big or small, investing your tax refunds can be a significant boost to your retirement savings account. Besides, it is always a good idea to pipe that money into an IRA. Think of it this way; they pay you back your money as tax refunds, then you take the money and put it in an IRA and get a tax deduction; it is a win-win.
Ensure you are getting your full employer’s match
It is essential to look at your company’s 401(k) options before getting started on a tangible level. Most organizations offer incentives to motivate you to invest part of your salary into a retirement fund. And whatever they fund, ensure that you put part of it into your retirement fund; besides, it is free money.
The employer match is one of the easiest and safest money you can make, giving you an immediate return for doing what is supposed to be done. On most occasions, companies can contribute almost the same amount as you do, up to a specific percentage of your income. Some employers don’t even offer a match at all, and if you are not sure that your company has a match or think you are not getting enough match, contact your employer’s HR branch to know more about your company’s guidelines.
Know the ins and outs of retirement savings accounts
With a retirement savings account, like the IRA and 401(k), you must consider contribution limits. So, as much as you want to increase your savings to make up for the lost time, there is only much you can put into these accounts. For instance, in 2020, individuals below 50 years old could only contribute up to $19,500 to their 401(k) account, while their IRA accounts; they could only contribute up to $6,000.
In addition, there is a sharp fine for withdrawing money from an IRA account before the age of fifty-nine and a half or a pretax 401(k) account. And in some IRA accounts, there is a fee you will be charged for using the money before you had it open for five years. So, keeping this in mind, you need to do your best to avoid withdrawing cash from these savings accounts.
And while you might be eager to grow your retirement savings, it is crucial to remind yourself that retirement does not have to be your only financial goal. At least, have a health emergency fund and a good plan of paying off your debts. This will play a significant role in making sure that you have a healthy financial future.
The many positions in a portfolio grow at different rates, and with time, they can diverge from the goal allocations. Therefore, you should look at your portfolio to check if there is any rebalancing needed. You will be able to return your 401(K) from its current to target allocations by rebalancing.
Automate your retirement contributions
One of the best and easiest ways to make savings a routine is to set up a programmed contribution. You can set up computerized contributions to your account. These contributions can be timed with your salary, so you won’t have to worry about making your contributions or getting late with the payment.
The Bottom Line
A retirement fund is an excellent way to save for your golden years, and it is also a perfect time to join most employees who are safeguarding their financial future by investing and saving. Besides, most ways to grow your retirement funds, like investing in real estate, are painless and easy and come with a privilege for your effort.