Tuesday, 21 April 2015

4 SIMPLE STEPS YOU CAN TAKE NOW TO PREPARE FOR YOUR RETIREMENT


It’s a good idea to periodically take a fresh look at your retirement plan. Making a few small changes now can make a big difference down the road. We’ve put together four simple steps you can take now to make both the saving and investing process a little easier — and a lot more rewarding.

1. Start saving now
This may be the most important step you can take. Thanks to the power of compounding, if you start saving at age 25 versus age 35, you could potentially increase your retirement nest egg by 85%1. But remember: it’s never too late. Even if you’re only 10-15 years from retirement, you can still save a substantial amount in an IRA and in your employer plan.
It’s equally important to save consistently. Many people use an Automatic Investing Plan2, which automatically deducts a pre-determined amount every month from your bank account or paycheck and transfers it to your IRA or other retirement savings plan. You’ll be making regular contributions without needing to think about it, and it avoids the anxiety and emotional component of waiting for the “right time” to invest.
retired couple4
2. Max out tax-deferred options
If your employer offers a 401(k), make sure to participate. In addition to adding to your savings, salary deferrals into your employer’s 401(k) plan will reduce your taxable income. If you were automatically enrolled into your employer’s plan, make sure to check your salary deferral rate. The average plan will enroll participants at only 1% to 3% of their pay. Increase that percentage if you can, so that you’re taking full advantage of your plan.

It’s especially important to maximize your salary deferrals if your employer matches your 401(k) contributions. For example, an employer may contribute an additional 50 cents for every dollar you contribute up to 6% of your salary. If you contribute less than 6%, you’re essentially missing out on “free” money.
3. Stay on top of your savings
Did you know that the average person changes jobs every 4.6 years3? If you match that average over your working career, you could potentially end up with assets in more than ten employer plan accounts. That means ten account statements, ten investment menus to review and choose from, and ten beneficiary designations to monitor. And that’s just for employer plan accounts. If you also invest in an IRA, you might have even more accounts to manage.
Consolidating your old 401(k)s and IRAs into a single IRA can help you ensure proper asset allocation4, minimize fees, more easily keep track of beneficiary designations, and simplify the minimum distribution process when you reach the age where they are required.

4. Save beyond 401(k)s and IRAs
Once you’ve contributed as much as you can to tax-deferred accounts such as a 401(k) and an IRA, think about putting away additional money for long and short term goals. These could be funds set aside for an emergency, a vacation, a home purchase or renovation, or college tuition for a child.
Remember that you don’t have to take action on all four of these ideas at once. Start with one and go from there — every step counts.

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