How to max out your retirementUncategorized , Comments Off 37
Exactly what you need to do to max out your retirement depends on determining what you mean by maxing out. It could mean setting a dollar goal and hitting it by your desired retirement age. It could mean making the maximum contributions to specific financial products.
You might diversify your assets for maximum protection. You should try avoiding overspending that prevents you from padding your nest egg during the next few decades. Whatever your goals, creating a detailed road map now will help you generate the maximum net worth possible by the time you retire.
Maxing out your retirement goals takes a long-term, proactive effort.
Set Your Retirement Goals
The first step in maxing out your retirement is to determine exactly what goals you want to hit. This can include retiring at a specific age, owning your home free and clear, having a specific net worth and having little or no debt on your retirement date.
While you can use a retirement calculator you find at a credible financial services website to help you, it’s best to meet with a financial advisor skilled at creating comprehensive financial plans. These plans take into account strategies such as life insurance, real estate, 401(k) and 403(b) plans, pensions, IRAs, Social Security, mutual funds, tax planning and other asset-development plans.
Once you have specific goals for each, you can create plans for maxing each one, or reaching your goals by a specific date.
Learn Your Maximum Contribution Rates
Some retirement products provide tax-free or tax-deferred contributions, but only up to a certain amount. These include products such as some 401(k) and IRA products. Review your options and learn the maximum contributions you can make to earn your tax benefits.
You might want to contribute more than the maximum that earns you a tax benefit, but a financial advisor might show you ways to better invest that money. If your employer offers a 401(k) match, contribute the maximum amount to earn as much “free” money as possible from from your company.
Start Saving Now – or Else
Waiting to start contributing to your retirement savings robs you of the exponential growth of your money that comes with compounding interest over decades. Even if it’s just a small amount of money, start putting something toward retirement now. You’ll get in the habit and turn those small amounts of money into big paybacks.
Manage Your Spending
One of the best ways to maximize your net worth is to save money. If you don’t track your spending, you won’t realize how much seemingly small purchases can cut into your retirement. Take going out to the movies, for example.
If you spend $40 per week on tickets, popcorn and soda twice each month, that’s more than $1,000 each year if you include credit card interest. Over the course of 40 years, that’s a huge hit to your retirement potential when you consider the growth that $40,000 would have realized.
If you cut back on movie spending just once each month, that might not seem like a lot, but if you find 10 painless ways like this to reduce your monthly spending by $100 per month, you might have an extra $500,000 when you retire. Look for ways to cut your spending on utilities, entertainment, groceries and clothing that won’t cramp your style, but saves you thousands each year.
Reduce or Eliminate Debt
Carrying debt can rob you of significant cash you could have otherwise put toward your retirement. If you carry $10,000 worth of credit card debt at 15 percent annual interest, that’s $1,500 each year that won’t go toward your retirement savings. In addition, higher credit balances can reduce your credit worthiness, causing you higher interest rates on auto, home or other loans. The sooner you can reduce or eliminate debt, the sooner you can put more money toward retirement and earning interest.