As you head into retirement, successful savers have firmed up their retirement accounts by saving up to 15% of their annual income over a decade. The ideal retirement fund should have at least ten times your annual pay saved away. Here are some tips to make the most of your peak earning years.
- Save all windfalls
Those in jobs that provide surplus income like bonuses and commission should commit to storing that money into a savings account. Successful savers make a habit of saving windfalls.
- Catch-up Contributions
If you have reached the age of 50, you qualify for catch-up contributions in your IRA and 401k. You may contribute an additional 6,0000 in your 401k and 1000 in an IRA.
- Visualize your Retirement
Imagine what you want your life to be like in your future. If you have retirement goals and plans, try visualizing them. Pre-retirees who have a concrete future mapped out will find saving for the future far less challenging.
- Don’t borrow from your 401k
Borrowing from you 401k is a tempting prospect. When you reach retirement the amount of money in your account can decrease by over a quarter of a million just by removing $30,000 in growth capital. Math courtesy of J.P. Morgan Asset Management: Save a steady 8% from age 25 (with a salary of $30,000 that rises 2% a year), and you could have $1.3 million at 65. Take a $10,000 loan at 33 for a home, a $10,000 loan at 50 for college, and make a $10,000 early withdrawal at 62, and that drops to $930,000.
- Be mindful of your college spending
College education is a large expense for parents. Budget for higher education cost and make sure that your children stay within those amounts. The amount of parents with PLUS loans have doubled in the last decade and heading into retirement with large debt can be detrimental your retirement fund.
- Check your Investments
Are your investments growth adequately and as expected? Have you checked maintenance fees? When surveyed over 50 percent of investors did not know what they paid to have their assets managed. Make a documentation request from your asset manager that explains where all your money goes, down to the last cent.
- Diversify your investments
Making money without working is the ideal retirement goal. The goal in retirement is to have investments that pay you dividends. Buying an investment property prior to retirement can yield great returns for savvy investors who research and choose the right location for their rental property.