A retirement fund is crucial if you’re looking towards a happy, stress-free life in your golden years. But given the laundry list of expenses most of us deal with daily, it’s easy to forget all about retirement savings until it’s too late.
According to a recent FinanceBuzz survey, an astounding 35% of Americans have no money saved for retirement. Also, the Center for Retirement Research’s analysis of the National Retirement Risk Index (NRRI) suggests that 50% of today’s households won’t have enough income to maintain their pre-retirement lifestyles.
The sooner you set up a retirement account, the better. Here are a few tips you can use to kickstart your retirement savings journey, no matter where you are in life.
- Get a Good Headstart
Ask any financial advisor in Gainesville, and they’ll tell you how important it is to start investing in your retirement as early as possible. With a long savings window, your retirement account will have more time to grow.
For example, if you plan to retire in your 60s, it’s best if you start funneling cash into your retirement fund in your 20s. This will give it nearly forty years to build up to a sizeable amount.
- Outline Your Spending Needs Post-Retirement
As per the 2020 Retirement Confidence Survey, 4 in 10 workers think they will need $1 million or more to live comfortably in retirement.
Defining your post-retirement expenses will help you right-size your portfolio. There are plenty of ways to do this. For starters, you need to be realistic about your spending habits. Your debt won’t magically disappear once you hit the brakes on your career. Moreover, there are children’s expenses, holidays, and bucket-list goals to consider.
More expenses in the future require additional savings today. When planning your retirement spending goals, be sure to outline an accurate estimate of your living costs. Understating or overstating your expenses may cause you to lose out on your dream lifestyle altogether.
- Take Advantage of the Traditional 401(k) Plan
Believe it or not, your company’s traditional 401(k) plans are useful. Once you sign up, a small bit of your salary gets transferred to your 401(k) savings. This means you can contribute more to your retirement fund without jeopardizing your monthly budget.
To top that, you’re in complete control of how much or how little you want to contribute to your account (as per the plan and IRS limits).
Other advantages of investing in a 401(k) plan are as follows.
- The money you’ve added to your 401(k) account is yours. As a result, you can take it even when you change jobs.
- Since contributions to 401(k) plans are taken out before federal income taxes apply, it lowers your total taxable income. So, you may owe less in taxes.
Investing in a 401(k) plan can work wonders for your retirement savings in the future. And, in case you don’t want to rely on your employer’s investment choices, you can opt for a self-directed 401(k) brokerage account and hire financial advisors in Gainesville to suit each strategy to your personal goals.
- Strategize Your Healthcare Expenses
Old age brings about increased medical expenses. The 2021 Fidelity Retiree Health Care Cost Estimate suggests that an average 65-year-old couple may require about $300,000 (including tax) to cover healthcare costs in retirement.
Thanks to the Consolidated Omnibus Budget Reconciliation Act (COBRA), you’ll have the option to continue your employer’s health plan for at least eighteen months after you retire. And, once you turn 65, you’re automatically eligible for Medicare (provided you enrolled in it).
However, Medicare isn’t enough for the long run. It does pay for certain healthcare services, but not all. Plus, if you want to retire early, you’ll have to fend for yourself until Medicare kicks in.
Fortunately, skyrocketing healthcare expenses don’t have to take a toll on your retirement fund. You can consult financial advisors in Gainesville and prepare for post-retirement health costs in the following two ways.
- Opening a Health Savings Account (HSA).
- Opting for long-term care insurance (in case the long-term care insurance premium is too high for you, choose a life insurance policy that allows the addition of a long-term care insurance rider).
- Downsize Your Home
Suppose you own a spacious three-bedroom condo. Over the years, you’ve raised a family there. But now that you’re approaching retirement and the children are moving out, you probably don’t have much use for the space. Footing the utility/maintenance bills for a big house can seriously dent your retirement savings.
So, why not move into a smaller, cozier home fit for you and your partner instead?
Downsizing, when done correctly, has multiple advantages. To begin with, it is a huge cash windfall. You can easily invest the money in your retirement fund and splurge on a vacation.
A few other advantages of downsizing include:
- A reduced mortgage burden.
- Decreased ongoing expenses.
- Enhanced quality of life.
- Partner With a Retirement Financial Advisor
Chalking out a retirement plan is easier said than done. However, getting help right at the get-go may enable you to lay the groundwork for a secure nest egg.
In this regard, certified financial advisors in Gainesville can guide you through the complicated process of retirement planning and point out areas for improvement. Plus, their expert knowledge and valuable insight will help you build a retirement portfolio that fits your goals.
It’s safe to say that your retirement isn’t going to pay for itself. But with these tips and a little effort, you’ll be able to gather a decent chunk of wealth for your senior years. All you have to do is start early enough and invest wisely! Setting up a retirement fund can be daunting. Fortunately, our trusted financial advisors in Gainesville can walk you through the entire process. We serve clients in over thirty states and take pride in our commitment to them. In case you need more financial counsel for your retirement, feel free to contact us today!