Saving for Retirement

Saving for retirement can seem daunting, but once you have a system in place, the anxiety that often accompanies retirement saving can be replaced with a feeling of confidence that you are creating a sound financial future. Working with a financial advisor can help you determine the best strategies for you, creating a savings plan that allows you to reach your long-term goals without sacrificing life's little pleasures along the way. Saving for vacations, entertainment and even your kids' college education should all be a part of your retirement plan. A certified financial consultant can help you develop a strategy that takes all these factors into consideration, allowing you to live life to the fullest now and during retirement.

Basic Saving Strategies

No two people will approach saving for retirement in the same way. A professional financial planner understands individual differences and will use appropriate strategies to help people to reach their unique long-term goals. When you're just starting to save, however, some basic strategies are beneficial to everyone. Opening a standard savings account, even if you only contribute $25 a month, can help you start a habit of saving even during times when you feel like you can barely make ends meet. The effects of compound interest will make every dollar you save in your 20s worth significantly more in your 60s. No matter what you can put aside, saving for retirement will benefit you enormously if you start young.

Aside from a standard savings account, opening a standard 401k or Individual Retirement Account (IRA) is one of the best ways to start saving for retirement. A 401k, which you can open through your employer if this plan is offered at your company, allows you to contribute up to $16,500 a year in tax-deferred retirement contributions. This means that your account can grow tax-free until you begin to make withdrawals when you retire. Some employers even match your contributions up to 100 percent. Ask your human resources department about your company's 401k policy. If you are a small business owner or an independent contractor, you might have options through SEP or Solo 401k accounts. If you work for a nonprofit or government agency, you will likely have the option to open a 403b account rather than a 401k.

You can open an IRA no matter what your profession is. You can contribute up to $6,500 a year to an IRA, which works similarly to a 401k in that your funds typically grow tax-free until you make withdrawals during retirement. For some people it makes more sense to have their contributions taxed as they make contributions so they can withdraw their funds tax free. This arrangement is available through a Roth IRA. Both IRA and 401k accounts allow you to make "catch-up" contributions once you reach the age of 50. You can contribute an extra $5,500 to your 401k and an extra $1,000 to your IRA.

Good Investment Strategies

Saving for retirement is a slow and steady process, but once your savings account reaches a few thousand dollars it is time to start thinking about investing. Knowing where to put your money can be difficult, but a professional financial advisor can help you create a diverse portfolio that maximizes your returns and mitigates risk. If you are in your 20s and 30s, your saving strategy will likely include a good percentage of common stocks and other higher-risk securities. Saving for retirement in your 20s and 30s can also mean investing in a home, since you can benefit from the appreciation without an immediate need for you investment to be liquid.

Once your reach your 40s and 50s, your financial planner will probably advise you to shift your saving strategy toward less risky investments like bonds or mutual funds. In your 50s you will probably also start thinking about your post-retirement plans, including whether or not you want to keep your house, how often you plan to travel and what kind of lifestyle you plan to enjoy. If you do not plan to sell your house, discussing your finances with your financial advisor long before you retire can help you start saving for retirement in a way that maximizes your other investments. If you plan to sell your home and buy a smaller condo, your advisor can help you time the sale of your house so you have funds when you need them.

Saving for retirement isn't easy, but a certified financial advisor can help you develop a strategy that gives you the funds you need to live comfortably once you retire. Whether your long-term dream is to remodel your home or to tour the world with your spouse, your financial advisor can help you reach those goals by saving for retirement with smart strategies that work for you.

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