Retirement can be expensive and struggling financially in your golden years is something that you don’t want to endure. Most Americans don’t save enough for retirement. If you want to retire without financial stress, these are five golden rules that you need to start actioning today.
1: Social Security Won’t Be Enough
Social security won’t provide enough benefits in pre-retirement to allow for a reasonable quality of life. Most social security statistics are developed with lower income earners in mind, so the actual benefits won’t be as good if you’re on a middle or higher income bracket. Don’t rely on social security to provide meaningful assistance in your later years.
2: Retirement Savings Should Come Before Other Goals
It’s easier to live modestly now and then reap the rewards while you are in retirement. Large purchases should be carefully analyzed to determine whether they’re necessary. Do you really need a holiday home, a boat, or that second car that you can now afford? Making sacrifices today will pay off in the long term. Money saved or invested today will appreciate, whereas purchases today will not improve your quality of life when you retire.
3: Taxes Could Increase: Mitigate with an IRA
Taxes are likely to increase in the long term, despite the breaks we are getting from the current administration. A Roth Individual Retirement Account can allow you to make deposits with income that has already been taxed, so your withdrawals in retirement will be tax free. If taxes increase, then you’ll have the benefit of paying them now when they’re more affordable.
4: Create Personal Savings as Early as Possible
For most people, a retirement fund won’t be enough to live on. Saving early will mean that you can take advantage of compounding interest. Even something as simple as long term saving in Certificate of Deposit accounts will benefit you in retirement. Go for the longest term possible and reinvest once the deposit reaches maturity.
5: Invest for Income Later in Life
When you are investing in stocks or bonds, think long-term rather than focusing on short term gains. Growth stocks are smarter than the riskier ones when you are thinking in terms of retirement. Dividends later in life could supplement your retirement income and make life more comfortable. Always diversify your portfolio to minimize risk and consider hiring a financial advisor to reassess your portfolio yearly.
Retirement isn’t that complicated. Save more now, make wise financial decisions, and enjoy the benefits when it’s time to sit down and relax. This will lead to the best possible retirement with more freedom to enjoy your golden years.
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