An average American spends around two decades in retirement. It might seem weird, but the fact is that less than 50% of Americans have evaluated the funds they need to save for retirement. It is always advisable to make saving for retirement a habit. Here are top 10 ways how you can get prepared for retirement.
1. Begin and continue saving in line with your goals
If you are already saving funds for retirement, continue it! If you are not, it is high time to begin. Start with a small amount and then try to enhance the amount each month.
2. Be clear of your retirement needs
You need to understand that retirement is expensive. The key to retire in a secured manner is pro-active planning. It is estimated that 70-90% of preretirement income is required when you cease to work. So, go ahead and hold the reins of your financial future now.
3. Make contribution to employer’s plan
If your employer is providing you a retirement savings plan, like a 401(k) scheme, sign up without hesitation and contribute as much as you can. Find out the amount of contribution you need to make and the period up to which you are required to contribute for getting the money.
4. Know your pension plan
In case your employer provides a conventional pension plan, find out whether the plan covers you and also understand the way in which it works. It is good to solicit an individual benefit statement to check out the amount of the benefit. Also know whether your spouse’s plan would give you some benefits.
5. Take into account basic investment principles
The mode of saving can be as significant as the amount you save. Inflation along with the kind of investments you make is vital in deciding the savings at retirement. So, distribute your savings in different kinds of investments and get to know each plan’s investment options.
6. Do not withdraw the retirement savings
If you withdraw the savings at present, you will lose out on principal as well as interest, along with missing tax benefits. Moreover, you might also be required to pay withdrawal penalties.
7. Get a plan from your employer
In case the employer has no retirement plan in place, suggest for starting one. There are several plans available in the market. Your employer might be capable of setting up a simplified plan which could assist you as well as your employer.
8. Consider an Individual Retirement Account
You can save a maximum of $5,500 yearly through an Individual Retirement Account (IRA).If your age is 50 years or more, even more can be contributed. IRAs provide you with good amount of tax advantages.
9. Learn about the Social Security benefits
The benefits paid by Social Security are more or less equal to 40% of your earnings prior to retirement. Get an estimate of your benefit through the retirement estimator at the website of Social Security Administration.
10. Raise questions
All the above-mentioned tips would help you move ahead in the right direction. However, you need to gather more information and for that you need to ask questions to your bank, employer or a financial advisor. Ensure that you understand the answers.