Smart Reviews

Tools to Help Save for Retirement

It is never too early, or too late, to start saving for retirement. Even though you want to get an early start on your retirement savings, it is best to get started now without beating yourself up too much or waiting for the perfect time. There is always risk associated with any investment so be sure to understand your tolerance level before settling on a plan. A standard retirement fund calculator can provide insight into how much money you will potentially need for retirement based on your lifestyle and other factors like current assets and home mortgage status. Whether you are able to contribute to your employer’s 401k program or are self-employed and need an IRA it best to get started now!

The best retirement tool is often an employee-sponsored 401k plan. If possible, you want to contribute the maximum amount possible into your 401k. If this is not feasible, try to at least deposit enough to qualify for any matching program that your employer offers. This will passively increase your savings and help you to meet your goals more quickly. As you are able, increase your contribution until you have reached the maximum amount. If there is a 401k program available to you, be sure to start taking advantage of it, even if your initial contributions are low.

If your employer does not offer a 401k, or if you are self-employed, you will want to open an IRA immediately. You will be able to make contributions throughout the year. Even if there is no employee match, having these funds earmarked for retirement will give you peace of mind along with some tax advantages. Check with your financial advisor to see if you are able to “make up” contributions from the following year. Deposit as much as you can each year while increasing the amount until you reach the maximum allowable annual contribution.

Even though mutual funds do not receive the tax advantages of IRAs and 401ks there are advantages to opening these accounts specifically for your retirement. Be aware that any investments tied to the stock market will fluctuate and it is important to know your risk tolerance level prior to opening an account. There are many age-related benchmarks that can provide guidance on the breakdown and diversification of your investment portfolio. As 401ks and IRAs have maximum allowable deposit amounts you may not be able to meet all of your financial goals through those instruments. A mutual fund account can help to supplement those accounts when you reach retirement age.

Retirement calculators are a great way to learn more about how your savings habits of today can impact your future. It is unlikely that Social Security will completely cover all of your expenses after you are retired and having a nest egg available can help you make ends meet. There are many companies that offer free retirement calculators online and others that offer free consultations to get you started. Today’s most respected financial institutions that provide retirement funds and advice include Vanguard, Charles Schwab, and Fidelity.