Planning for retirement is a multi-step journey that changes over time. In order to enjoy a secure and comfortable retirement, you need to establish a financial cushion to fund everything you’ll need. It all starts with planning your retirement goals, and then taking into account the time you’ll need to meet them.
Saving for future retirement can be a challenging process that will require personal financial planning and follow-through. Given that, below are important factors to consider for a financially stable retirement.
The government and most businesses provide incentives for savings. If you set aside money and place it into a qualified retirement plan such as a 401(k) or IRA, you can have a lower tax bill in the year the money was saved, as well as accumulate money tax-free in the years to come.
In addition, there are companies that contribute funds if an employee is contributing to a retirement account. Because an employer’s contribution amounts to free money, many financial advisors recommend that their clients make the most out of this financial opportunity.
More brokerage and mutual fund firms, including the large and well-known ones, are allowing clients to open small accounts without requiring any fees or minimums. For those planning for their retirement, opening accounts in these bigger firms is a wise decision.
They provide different types of investment options such as ETFs and mutual funds, and they offer reasonable and transparent fees. Another advantage of these firms is, they have a sound infrastructure that offers you additional services (i.e. personal financial planning advisers) to assist with your evolving needs.
As you can guess, choosing which firm to go to is a crucial decision you need to make. A majority of these firms require fees for transferring accounts and constantly switching firms will reduce your total savings. Before making a selection, consider the range of ETFs and mutual funds, as well as the fees they offer instead of focusing on trading tools. It’s also worth noting that trading may not be advisable for people who have limited funds and are in the process of saving.
Novice investors and savers should have a realistic approach to risk. Although it’s good to start with any amount of savings, small amounts of funds will not produce liveable income amounts in the near future. That’s why it makes little sense to prioritize putting your money in fixed income or conservative investments right off the bat.
If you don’t want to cause damage to your initial savings right away, steer clear from the riskiest areas of the market (i.e. leveraged funds, gold, biotech, etc.). A more ideal place to start would be a basic index fund, which matches popular market indexes such as S&P 500 or Dow Jones Industrials. There may be a risk that the price will fall but your chances of a complete wipe-out are close to none.
Start with Personal Financial Planning Now
The process of preparing for retirement is often overwhelming and the numbers may seem scary for some. However, with proper planning, it’s easy to make a substantial impact on your financial stability as you head to retirement. Get started now, begin eliminating all sorts of debt, and if necessary, push your retirement age in order to have stress-free senior years of life.