3 tips to crush your retirement goals

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If you want financial security as a senior, it won’t just come from Social Security. You have to set retirement goals and stick to them to build up a generous nest egg. Unfortunately, sometimes this can be easier said than done.

To help you out and maximize your chances of success, we asked three retirement experts at Motley Fool for some tips that can help you crush your goals and take the sure path to a successful retirement. Here is what they are.

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Start saving early

Maurie Backman: Maybe your goal is to retire on $ 1 million. Or maybe you hope to end your career with 10 times your ending salary in the bank. Either way, raising a large amount of money takes work, and the easiest way to go about it is to start accumulating money at a young age.

Imagine you start working full time at 22 and want to retire at 67, which is the full retirement age for Social Security purposes if you were born in 1960 or later. If you manage to put just $ 200 a month into a pension plan and invest that money for an average annual return of 8%, which is a reasonable assumption with a stock-rich portfolio, then in 45 years you will end up by accumulating $ 927,000.

Now here’s the interesting part – to end up with $ 927,000 you will only need to part with $ 108,000 of your own money in our example. That’s a gain of $ 819,000. Part of the reason for this gain lies in wise investing – investing heavily in stocks is a good choice if you are saving for a long term goal. But another part of the reason for this gain is time. By giving yourself 45 years to capitalize on compound returns, you are setting yourself up for an enjoyable and secure retirement.

Of course, this is just one example. The point, however, is to illustrate that saving from an early age could do wonders for your retirement nest egg. If your goal is to retire with enough money to live a comfortable life, start earning money for your IRA or 401 (k) as soon as you have a regular paycheck. It will be worth it in the long run.

Maximize your employer’s 401 (k) correspondence

Katie Brockman: If you have access to matching 401 (k) contributions through your employer, it’s wise to take full advantage of them – they can help you save more than you think.

Typically, your employer will match your 401 (k) contributions up to a certain percentage of your salary. The average match is about 3.5% of an employee’s salary, according to the US Bureau of Labor Statistics.

Suppose, for example, that you earn $ 50,000 per year and your employer equals 3.5% of that amount, or $ 1,750 per year.

Let’s also assume that you currently contribute $ 1,000 per year to your 401 (k) and your employer matches that amount. In other words, you are investing a total of $ 2,000 per year when you could potentially invest $ 3,500 per year if you contribute enough to earn the full consideration.

Assuming you were getting a modest 7% annual rate of return on your investments, here’s roughly how much you would have saved over time if you had saved $ 2,000 per year versus $ 3,500 per year:

Number of years Total savings by investing $ 2,000 per year Total savings by investing $ 3,500 per year
5 $ 12,000 $ 20,000
ten $ 28,000 $ 48,000
20 $ 82,000 $ 144,000
30 $ 189,000 $ 331,000
40 $ 400,000 $ 700,000

Data source: author’s calculations.

In this scenario, by paying an additional $ 750 per year (which works out to about $ 63 per month) and earning an additional $ 750 per year from your employer, you can increase your lifetime savings by about $ 300,000.

Another thing to keep in mind is that since the amount you receive in matching contributions is usually a percentage of your salary, you will receive more from your employer as your salary increases. By constantly maximizing your employer as you receive raises and bonuses, your total savings will skyrocket over time.

Automate your retirement investments

Christy Bieber: Most people want to to start saving early and aspire to maximize their correspondence with the employer. But in fact, continuing to invest for the future is much more difficult than Planning invest.

Unfortunately, life often gets in your way, and the money you hoped to invest for retirement ends up being spent on other things. The best way to make sure this doesn’t happen is to give yourself no choice. You want to reduce investment efforts by automating the process.

This is quite easy to do with a 401 (k). All you need to do is register with your employer to have contributions taken from your paychecks before you receive the money. But you can and should also do this with other retirement investment accounts such as an IRA or health savings account.

You should also aim high with your automated contributions. Set up a budget that allows you to save 10 to 15% of your retirement income and set up automatic contributions for this amount. If it turns out that you really can’t live on what’s left, try increasing your income or trying other spending cuts before you bring your contribution back to a more comfortable level. Then work as fast as possible, increasing your contributions bit by bit.

The reality is that most people stick with the status quo and it’s much easier to put contributions into your retirement account. once than forcing yourself to contribute every month or every year. If you’ve made the process of investing for your future automatic, you’ll never miss a contribution or miss your goals unless you take the affirmative step of doing so.


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