Retiring rich
The new year is a perfect opportunity to sit down and think about the future that lies ahead. The dream of retiring rich is more realistic today than it has ever been. In this day and age, retiring wealthy is no longer reserved for a few lucky Americans. With some planning, patience and smart advice that dream of retiring rich can be a reality…
When people make resolutions they often think in the short term and forget that planning for retirement can be a lengthy but pain-free process. The key to retirement success is patience, the longer you give yourself to plan the better your chances of coming out a winner. As long as you start saving as early as possible and plan for the long run and the next 9 steps will steer you towards a future of retiring wealthy.
1. Set realistic goals.
Learn to project your retirement expenses based on your own special needs, not what your friends or neighbors are doing. Be truthful about how you envision yourself retiring and how much your lifestyle will cost you. Let this end goal determine how much money to save in addition to Social Security and the many other forms of retirement income.
2. A 401(k) is the simplest way to save for retirement.
Many people ignore that contributing a few dollars to a 401(k) plan give you an immediate tax deductible, tax deferred growth on savings and if you’re really lucky a matching contribution from your company. With a 401(k) not only are you saving money now, but you are multiplying how much that money will be worth when it comes time for you to settle down into retirement.
3. An IRA also can also give a tax-advantaged boost to your savings.
Like a 401(k), Individual Retirement Accounts (IRA)s can also offer you huge tax breaks. There are two types of IRAs, a) Traditional IRA offers tax deferred growth meaning you only pay taxes on your investment gains when you need to withdraw b) Roth IRA by contrast wont allow for deductible contributions but offers tax free growth meaning you dont owe any tax when making withdrawals.
4. Focus on how your assets are allocated.
How you divide your portfolio between stocks and bonds will have a big impact on your long-term returns. It also matters who is monitoring your portfolio. You might want to manage your portfolio yourself or have a certified financial planner do the work for you.
5. Choosing stocks for long term growth.
Stocks might be volatile in the short term but they have the best chance of sustaining high returns over long periods. A healthy dose of stocks will ensure that your savings account can survive increasing inflation and diminishing purchasing power of your nest egg. As with all things, diversification is important, spread your stock portfolio to include low risk and high risk stocks.
6. Don’t invest too heavily into bonds, even in retirement.
Many of us make the error of stashing most of our portfolios into secure bonds. Unfortunately bonds do very little in the long term. 10 or 15 years down the road inflation can easily make bonds worthless.
7. Tax-efficient withdrawals can stretch your nest egg.
Once you’re finally retired and enjoying the comfort of financial security you can make your assets last even longer if you draw money from taxable accounts before depleting tax-advantaged accounts that can be left compounding for as long as possible.
8. Working part-time even if you’re rich makes sense.
Aside from keeping you socially engaged a part time job once in a while can also reduce the strain on your nest egg. Having a job lowers the amount you must withdraw from your nest egg annually.
9. Other creative ways to get more out of retirement assets.
Think outside of the box if you want to come out ahead in the retirement game. You might want to relocate to a community with lower living costs or use the features of a reverse mortgage by transferring some of your home’s equity into income.
