Supercharge Your Retirement
In our last blog post we touched on common mistakes we see regarding retirement. Now that you know the things you shouldn’t do, we want to let you know there are a few things you should definitely be doing for your retirement.
Saving for retirement doesn’t have to be hard, but it requires immediate action both in setting up your accounts and reducing current expenses. Check out the following things you should be doing to fund your retirement.
The best time to start saving for retirement was when you got your first paycheck; the second-best time is right now. The sooner you start saving for retirement, even if it’s as small as $50 from each paycheck, the longer you are giving compound interest to boost your account balance. Here are a few numbers to back up what we’re saying:
A 20-year old would have to contribute $245,000 over 45 years to reach $2 million in an account earning seven percent.
To reach the same $2 million in the same account, a 50-year old would have to contribute $1,008,000 in 15 years.
The more you save, the more contributions you can make to your retirement. Even small amounts add up over time thanks to compound interest. For example, if you saved an additional $70 and deposited that in a retirement account earning 8 percent, you would have about $160,000 after 35 years.
Kill Your Credit Card Debt
What does this have to do with contributing to retirement? The more money you have to pay in interest and principal for your credit card use, the less you can contribute to your retirement every month.
Build Your Emergency Fund
Again, you may be wondering what this has to do with funding your retirement. By establishing an emergency fund with six months’ of living expenses in it, you won’t have to dip into your retirement accounts in the event of an emergency.
Now It’s Time to Fund
Okay, we’ve decided that we need to start saving now and have cut our expenses. We’ve also committed to eliminating our credit card debt and boosting our emergency fund. So, how do we fund our retirement?
Employer 401(k)- this money automatically comes out of each paycheck before taxes, so you won’t miss it. Employer 401(k)s are even more attractive if they match your contribution up to a certain percent.
Fund an IRA- IRAs are a great option if you’ve maxed out your 401(k) contributions or don’t have an employer-sponsored retirement planning. Traditional IRAs allow you to make tax-free contributions, while Roth IRAs contributions are taxed and withdrawals in retirement are not.
Don’t spend it- once you get money into a 401(k), IRA or other retirement account, don’t spend it! Don’t even think about dipping into it. Early withdrawals come with stiff penalties, and you’re working against yourself by making a withdrawal.
Lincoln Savings Bank offers a number of ways to help you save for retirement. Call or come by your nearest LSB office today to learn how we can help. We look forward to seeing you soon!
Lincoln Savings Bank, member FDIC