401k. Roth IRA. 403b. Annuity. For many people, these are terrifying financial terms that create a sense of dread and fear that retirement may be something that might not happen. The thought of working until your last breath is a thought shared by many Millennials and Gen Zs.
But getting yourself in front of the right retirement financial advisor can be one of the keys to long-term retirement success. Getting ready for retirement doesn’t mean you have to clutch a copy of the Wall Street Journal or stare at CNBC’s homepage. What it does mean, however, is that you have to prepare for anything that can happen in today’s market.
So if you’re starting in the workforce, in it after a few years, or still hanging on until 62, here are the things you need to know if you want retirement to be a reality.
Starting early is the most important rule when it comes to retirement. Beginning your retirement plan when you get into the workforce is the best method of success. Time, according to many retirement financial advisors, is one of the most powerful tools in your retirement toolkit.
Starting at age 25 versus age 40 can mean a several thousand dollars difference. With inflation, rising costs of healthcare, and other issues affecting retirement, putting yourself in the best position now is always the best option.
No one says you have to put a significant amount of money away for retirement the minute you begin the process. Starting small is better than not starting at all. There are many options when opening an account, and many of them have no-minimum or no-fee options.
It’s also a wise option to have a few dollars taken out every week or pay period. This money can be taken out automatically from your paycheck or you can set it up with your bank.
Understand Your Needs
Retirement success will largely depend on your standard of living and how much money to maintain it. According to the Department of Labor, you will need 70 to 90 percent of your pre-retirement income to maintain your standard of living when you stop working.
Contribute to Your Employer’s 401k Plan
We’ll contribute a dollar to your 401k plan every time you’ve heard this advice. There’s a reason why you’ve heard it so often, too – it’s among the best advice you’ll hear when it comes to retirement planning tools.
Most employers make the process of contributing exceptionally easy, too. It’ll likely be an automatic deduction from your paycheck into the 401k. Many employers offer a matching program depending on the amount of contribution. It’s free money!
Open a Second Retirement Account
Outside of your employer’s 401k plan, you should also consider opening an individual retirement account. An IRA allows you to contribute up to $6,000 per year in pre-tax dollars if you’re under age 50. There is also no limit to the number of IRA accounts you can open. Having multiple retirement accounts can also provide many tax benefits.
Consider an Investment
Retirement isn’t all about 401ks and IRAs. It can be about investments in companies, the stock exchange, bonds, or even cash. Buying a large amount of stock in a company allows you to receive a quarterly dividend. The dividend will largely depend on how healthy the company is at the end of the quarter, so invest wisely.
Investing in bonds can also be a way to generate money over the long term. Bonds turn into a valuable tool in ensuring a diversified portfolio. However, experts do stress the importance of understanding what you’re getting into when you invest in bonds due to the complexity of it.
Hire a Financial Advisor
Sometimes, the market can be unbelievably challenging for the average person to manage. From yields to splits and everything between, most consumers don’t have the time or ability to manage their future. That’s where retirement planning specialists come in.
A retirement advisor will take control of your financial position and provide you with a roadmap to success. Retirement planning advisors have a strict fiduciary duty to take care of your money. Most advisors are also licensed and registered as part of certification efforts.
Getting ready for future retirement does not mean fear, anxiety, and uncertainty. Instead, retirement planning services should make you feel empowered to make sound financial decisions. While market uncertainty would make anyone feel like the road under them is rocky, taking advice and getting guidance from the right people is an important decision.
But perhaps the best decision you can make when it comes to planning for retirement is deciding to start. The first steps toward a future of more relaxation and leisure can be daunting, but that doesn’t mean it can’t be done.