Top Habits to Ensure a Successful Retirement
The journey of a thousand miles begins with a single step. This adage is a guiding principle in preparing for your financial future. Seek out the cold hard facts about precisely how much you will need in your nest egg, and work backwards from there by taking the very first steps. Every little bit helps, especially when you factor in the power of compound interest over a number of decades.
Calculate the amount you will need for retirement. The internet has numerous resources to help you make this calculation. The monetary figure may seem daunting and out of reach, but at least it will infuse you with a clear set of goals to strive for. The amount will be based on a standard of living you are accustomed to or possibly striving for.
As you age, your expenses will only escalate so it is best to have a proactive savings approach from early on. Start making contributions to a retirement plan early in your adult life. Though it is easy for younger people to think of a million reasons why they can’t afford to make such contributions, the compound interest on those small amounts will cause their overall balance to mature handsomely in the long-term.
Ensure that you contribute at least enough to maximize the employer match in your plan. In this way, you are literally doubling your money. If you are not capable of maxing out, at least make a goal of increasing your contribution level year after year. Even a 1% increase will make a dramatic difference over time. Some plans have an escalator feature that can be set to automatically implement such increases.
Max out on contributions if you can. For example, in 2013 and 2014 you can defer up to $17,500 worth of your salary into a retirement vehicle. And if you are 50 or older, you can contribute another $5,500. This strategy is a win-win because you will be accustomed to living on less, and you will have saved the maximum amount possible. If you cannot participate in a 401(k) plan, then a Roth IRA is a very strong alternative. Many people are engaged in multiple plans, thus solidifying their portfolio.
Review your long-term strategy at least once a year. You can empower yourself by keeping a critical eye on research and adaptation. You will benefit from a synergy between the expert guidance your advisor provides and your continually expanding knowledge base. As you age, rebalance the growth and risk elements of your portfolio. You will want to reduce risk, thus focusing more on preservation the closer you get to retirement.