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Whether you’ve just entered the workforce, you’re comfortably along in your chosen career path or you’re in your final years of working, there’s no better time think about retirement than now. While it may seem like a distant chapter of your life, planning for retirement early on will help make sure you are financially prepared down the road.
When it comes to retirement planning, there are a few different ways to save for your future:
Regardless of the type of account you use to save, it’s important to save early and save often! Retirement accounts earn compound interest, meaning you earn interest on your principal and on past accumulated interest. For example, if you began saving $1,000 a year at 8 percent interest when you were 25-years-old, by the time you were 65, your account would be worth around $280,000. However, if you wait until you are 35-years-old to start saving, your account would only be worth about $122,000 by age 65.
One of the most challenging aspects of planning for retirement is knowing how much money you will need to retire comfortably. You can't always know what your expenses will be that far into the future. The Nest Egg Calculator will help you determine what size your retirement nest egg should be.
Looking for a way to boost your retirement savings? Increasing your monthtly 401(k) or IRA contributions can save you thousands down the line.
When you are ready to retire, it’s important to review your investment portfolio to address your changing needs and risk tolerance level. Upon retiring, your investing goals may shift from building wealth to actually using those funds to cover your living expenses. Consider working with a licensed professional as your investing priorities change. For example, you may want to shift your assets to less risky investments that continue to provide growth but produce a more stable income.
When working with a broker, keep a close eye on your monthly statemen ts to make sure your money is being invested in the way you asked. Watch for excessive or unauthorized trading as well as illegitimate brokers who push you into investments that are unsuitable for your needs, goals and risk tolerance level.
Finally, it’s important to continue re-evaluating your investing strategy throughout your retirement as your needs may change, the cost of living may increase or unexpected expenses may occur. Periodically revisiting your portfolio will also help you keep track of your “burn rate,” or how quickly you are using the funds available from your investment products.
- Indiana Takes Steps to Protect Seniors from Investment Scam Artists (AARP Bulleting)