Whether you’re in your 20s, 30s, or even 40s, it is not too late or too early to start planning for your future. Setting up a retirement fund provides financial security that lets you live out your senior years in a stress free, enjoyable way. Let our guide help you overcome the scary early stages of setting up a retirement fund.
Only saving a little won’t provide a substantial income, but starting small is the key to saving for retirement. Those who are financially stable should add the maximum amount allotted each year to their retirement fund. In 2017, that figure adds up to $18,000.
For those who may be still living from paycheck to paycheck, adding anything to your retirement fund is a good start. Focus on developing a habit of saving a little each month, and then eventually add more as your wages increase.
Begin by making small cutbacks. Use coupons instead of buying clothing and shoes at full retail price. For example, check Groupon’s Journeys coupon page before ordering a new pair of shoes. Eliminate any extra bills, such as unused gym memberships and premium cable.
Open an Account
Investopedia recommends opening an IRA with a large firm because these companies have smaller, upfront fees and require lower minimums to open. If your employer offers you a 401(K), accept it. The benefits of a company sponsored IRA greatly outweigh the risks. If your job doesn’t offer a 401 (K) plan due to your employment status, then you can either set up your own 401(K) or create a Roth account. Another option is a self managed superannuation, which differs from most IRAs in that you’ll be the trustee and in charge of how your retirement savings develop.
Another option is just to open a savings account, label it as your retirement fund, and contribute money to it after every paycheck. Eventually, you can transfer these earnings into a full IRA. This savings account lets you store money away for retirement but lets you wait to open a 401(K) or Roth until you feel comfortable making frequent contributions to it.
Pick the Right Investments
There are many ways to invest for your future. Many choose to invest in stocks and bonds. Mutual funds and Exchanged Traded Fund (ETF) are the best options for beginners. Both types of accounts allow you to invest a little or a lot in a bunch of different companies. This gives you a better possibility of seeing a higher return. ETFs work more on autopilot, with a more mechanical process of buying and selling assets, whereas mutual funds have someone managing your accounts and making decisions for you.
The average minimum investment in mutual funds and ETFs are $5,000. That should be your goal savings amount before buying any assets, but you can invest with less, even as little as $500.
If you’re organized, hardworking, and diligent, buying property maybe a good investment option for you.You would have to manage your building, which means maintenance as well as ensuring that tenants keep the property damage free and pay rent on time. Another option is to invest in startup companies in exchange for stock in the company. Both options are a little more risky than just buying assets but can end up making you a lot of money for your future.
Create an emergency fund to eliminate the temptation of dipping into your retirement fund early. Aim to save at least three months worth of income in it.