Retirement income is something that we all think about as we grow older, but not everyone knows how to save enough in order to maintain the lifestyle to which they’ve grown accustomed. One of the biggest fears of today’s retirees is outliving their nest egg, and it’s certainly a valid concern as health costs are on the rise, not to mention the average price of just about everything from groceries to gasoline increasing steadily over the past decade.
Individuals who are reaching retirement age are looking to improve upon the health of their retirement income as they prepare to leave the workforce, relying on the money they’ve squirreled away to provide them with the means to live comfortably.
There’s no time like the present to seek out new opportunities for financial growth. It’s not enough to know to start saving now, there are certain decisions you should be making to maximize your savings potential. Planning your retirement sooner than later will enable you to develop a healthier financial outlook and here are six ways to increase the size of your nest egg to have a more stable monetary future.
1. Make a Plan
It’s not enough to just start putting your money into a savings account and have it accrue with every dollar you deposit. There are many methods by which to save in order to maximize the amount of money you ultimately put away. Think about what you want to do in retirement. Do you want to travel? Do you want to move? What’s on your retirement agenda when the time comes? Knowing these goals before you retire can help you save more effectively by devising a savings strategy that identifies the type of investments that can get you there the quickest.
2. Save Save Save!
Devoting a portion of your weekly paycheck to your retirement through a 401(k) is a good start towards building a healthy nest egg. Many employers offer a retirement plan where they match your contributions up to a certain amount. Take full advantage of this by contributing up to their set maximum each payroll period. You should consider this free money, so be sure to get as much of it as possible.
Consider other financial instruments such as an individual retirement account (IRA) which can be tax-deductible, and annuities fund which works like a mutual fund with no contribution limits, or even a reverse mortgage that can pay you money based on how much equity you have in your home.
Saving doesn’t only mean putting money into an account, it also means refraining from splurging on large expenditures and keeping a limit on the money you spend from your current income while you are still working. That way you have more of it to live on while still putting enough away each week.
3. Don’t Touch
Once you start putting all of this money away into whatever funds or accounts you’ve chosen, leave it alone. It might be tempting to withdraw some of the money for whatever reason, but don’t! Not only will you risk depleting the account before you need it most, but you may incur fees, penalties, and any taxes that might come with taking that money out of the fund. So you’re actually losing more money than you are taking out when all is said and done.
This can be a challenging proposition as life often throws many roadblocks your way as you get older. You may find yourself needing to cover unexpected expenses with money that may not be readily available. The only place to turn might be your retirement savings and you must be diligent about avoiding such actions. But if you have no other recourse, talk to a financial planner or your banker first before taking that money out as a loan. See if this is a viable option that will allow you to pay back the loan before too long.
4. Know Your Fees
Speaking of fees assessments, make sure you’re familiar with those that are associated with the investment plan you’ve chosen. Not only are there fees for withdrawals, there could be fees for account maintenance, investments that are made within the parameters of the plan, and any fees that come with those types of investments as well. You could be losing anywhere from 5-10% of your wealth in fees alone when all is said and done. Investing your hard-earned cash wisely will help you keep these costs to a minimum.
5. Cut Your Costs
While we’re on the subject of costs, find ways to curb some of your spending in other areas. Developing a budget that tightens your belt when it comes to getting and staying out of debt is a smart way to save money in retirement. Pay off or refinance a mortgage to keep more money in your pocket over a longer period of time. Credit cards can also be a severe drain on your income, with high interest rates adding to the credit card debt that you’re taking on each month. Paying those down and getting rid of those cards with the highest rates will allow you to put more money away for later on.
6. Keep Working
It may not be the ideal situation for prospective retirees, but there are many older folks out there who just don’t want to stop working. Retirement can bring with it many things, positive and negative, but the idea of leaving one’s place of employment after they have spent a major part of their life working can prove a difficult transition.
Some seniors like to stay active and busy and might take on some kind of other part time work, just so they don’t feel like life has drastically changed so fast. A part time job, even one that can be done from home, will bring some additional income and prove helpful towards boosting a retirement fund by not relying on it to cover living expenses. Having some form of additional income to use in lieu of retirement money will keep that nest egg strong.
