How to Secure Carefree Retirement

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Thanks to the development of science and technology, the human lifespan has been significantly extended compared to just a few decades ago. Numerous innovations that made everyday life easier contributed to this, as well as great progress in the field of medicine. So today, we have quality healthcare and treatments for almost all known diseases at our disposal.

Longer life expectancy means that people will be retired longer. Although the retirement age is constantly moving, it’s still up to you to decide when enough is enough. And when you legally reach retirement age or length of service, you can finally start enjoying your long-deserved pension and your golden age.

However, due to some bad or insufficiently thought-out decisions, some retirees don’t have their retirement nest egg big enough to support the lifestyle they once had. And that usually goes hand in hand with the health problems that old age brings, which is an additional burden on the already tight budget of retirees.

This situation shouldn’t happen to anyone because everyone deserves to enjoy a well-deserved retirement. To avoid the common trap of an insufficient retirement fund, it’s important to make some wise moves during your working life. These will provide you with a carefree old age and enough money for everything you want.

Add Up to Your 401(k) Contributions

One of the first forms of retirement savings is employers’ contributions to traditional retirement plans such as Roth IRA, 401(k), or 403(k). These are tax-deductible, and your fund grows tax-free. You’ll pay taxes once you withdraw money upon retirement, either as a lump sum or through deductibles. Whether this is a good decision depends a lot on your current circumstances.

Savings in your 401(k) grow thanks to interest and dividends because your money is used for low-risk investments, which brings you a small but sure profit. But the problem with these plans is the contribution limits. You can add up only $22,500 to your 401(k) every year ($30,000 if you’re 50 or over), which at first doesn’t seem like much, especially if you earn a lot.

That’s why many companies offer matching contributions to their employees, as one of the tactics to attract and retain a quality workforce. If your employer is willing to boost your 401(k), don’t turn down this generous offer. Thus, the annual contribution to your employer-sponsored plan can grow to over 60k dollars. See here how this matching works.

Consider IRAs

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If you earn a decent amount of money and can save more than traditional retirement plans allow, you need alternative sources of savings. That’s why many people decide to add an IRA to their retirement nest egg. It has nothing to do with other retirement accounts. Simply put, you can contribute to each of them up to the allowed limit.

By setting up an IRA, you can add at most $6,500 a year ($7,500 if you’re over 50) to your retirement nest egg. But this money doesn’t just sit there but serves to invest it and thus increase your retirement fund. You can set up this account with a bank, online, or through an IRA broker and fund it in different ways.

A great deal with IRA is that it’s self-directed, meaning you make all investment decisions independently. So, if you play smart and invest your money in different investment vehicles like stocks, bonds, and ETFs, you can boost your retirement fund. At the same time, you can enjoy tax benefits, as you pay no taxes while contributing to this account.

On the cons side of IRAs, you may not be able to enjoy tax benefits every time. If your income is too high, whether you contribute alone or with a spouse, contributions aren’t deductible. Luckily, there’s a solution for high-earners like business owners and self-employed individuals, as they can invest in a SEP IRA.

Think of Investing

Saving is always a smart move, but you already know that the mentioned forms of retirement savings don’t bring high returns. Your savings grow due to the compounding effect, which isn’t much if you didn’t start saving at a young age. That’s why you have to find other ways to increase your retirement nest egg without too much hassle, and the best way to do that is by investing.

There are many assets in which you can invest your funds, and for these purposes, no more than 15% of your pre-tax income should go. How your portfolio will look depends a lot on your risk tolerance. In general, you can opt for stocks of all kinds, but for the most stability, your choice should be dividend-paying stocks. Still, leave some room for ETFs and annuities.

Another investment to consider is precious metals. The good thing about these assets is that you can start small since you can buy as little as one gram of gold or silver. You can invest in different products and physical forms such as bars, bullion, and coins, as well as gold-related stocks, bonds, and ETFs are very popular. You can set up a Goldco IRA and have peace of mind investing in this valuable asset through reputable brokers.

Solve Your Debts

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Loans and lines of credit you take during your working life can help you solve important life issues, such as studying or buying a house. However, your debts should be retired before you, that is, you should step into the golden age as financially relieved as possible.

As you get closer to retirement, you should reduce your debt. Avoid taking new loans, even short-term ones, because they carry high interest. Reduce the use of credit cards, and in general, try to cut spending. That applies to things that aren’t so necessary because you can put all that money into your retirement savings.

In general, you should pay off credit cards, student loans, and car loans first. As for higher debts such as mortgages, early repayment can be, but may not always be a good solution. Considering these are loans with a low interest rate, and that the number of installments in retirement is not large, you might want to take this one. Early repayment can lower your retirement savings, which can delay your retirement.

A better approach is to invest the money you might plan to pay off the mortgage early. With a good strategy and the help of financial advisors, you can pursue investments that bring solid income. But if you want to retire completely debt-free, you can think of downsizing, sending extra payments to a lender, or refinancing a mortgage with a short-term loan you can pay off before retirement.

Control Spending

Trimming your expenses now might seem harsh, but sometimes small savings at the right time can bring many benefits. For example, consider whether you really need two cars if you work and your spouse doesn’t. Having just one vehicle in use can save you on gas, repairs, and maintenance, leaving you with the extra money you can put toward your retirement nest egg.

There are many ways to cut expenses, but if that’s not doable, another way is to try to earn more. The offer of part-time jobs and side gigs is large. Depending on your skills and experience, maybe you can give online lessons, provide services outside of your permanent job (for example, if you do accounting), or push your luck in freelancing.

Look After Yourself

Old age often brings health problems. As good healthcare is quite expensive, these costs may take up a huge portion of your retirement savings. That’s why the principle of prevention is better (and cheaper) than cure applies well in this situation.

It’s always a good idea to take care of your health while you’re younger. Welcoming your golden age fit and healthy is a blessing, as you can enjoy it to the fullest. Also, whenever possible, have a health savings account (HAS) or long-term health insurance. More details on HSA are on this link.

Savings for retirement should provide you with a monthly income you can live on. No one knows what awaits them in the future, so it’s always good to have enough money for all expected and unexpected events so you can welcome your golden age carefree.

  • Post published:September 25, 2023
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  • Post category:Lifestyle

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