Retiring Riches: Six Ways To Save Money For Your Future

The problem that most retirees encounter is that government or employer-based retirement plans can hardly keep them above the median standard of living. If you do not want this to occur to you – meaning you want to have your retirement be enjoyable – then you need to actively plan your retirement in advance. Here are some tips which will help you save for the future and live out your retirement in style.

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Start early

The key to retiring rich is to start saving as early as possible. If you keep telling yourself that you can make up for the lost money by making higher contributions in future years, you may be wrong. Money does not work that way. In fact, cash invested today will have a disproportional impact on your wealth level at retirement.

Take advantage of employer matching funds

Many companies will match up to 50% of the contributions employees make to their 401k and other retirement accounts. If you are fortunate enough to work for a business like this, take advantage of it to the fullest. Otherwise you are throwing away free money (and who wants to do that?).

Don’t cash out of your retirement when changing jobs

When you are in a situation where you have to change your job, the most foolish thing would be cashing out of your retirement plan. Instead, you can roll over the proceeds into an IRA or your new 401k plan with your new employer. Not only can you avoid the significant tax penalties, but you will be able to keep your money working for you tax-free. Of course, you may need to withdraw money from your retirement account when encountering an emergency – but before you even think about doing so, make sure you have done everything required to qualify. Otherwise, you may end up with possibly thousands of dollars in fees and penalties.

Max out the annual contribution limit on your IRA

Make use of the IRA. If you haven’t made the maximum permissible contribution to your traditional or Roth IRA by the cut-off date, you may be disadvantaged, unless you are in your mid-fifties and are qualified for catch-up contributions.

Spending smart

Spending money is not as simple as you thought. For instance, a problem people regularly encounter is unexpected spending during holidays and on special occasions like birthdays and weddings. But keep in mind that you don’t have to break your budget every time you receive an invitation. All you need to do is find a simple and heartfelt gift.

Saving does not mean you should not enjoy holidays. It is a good idea to plan a trip with your family every year, and with your whole household. When you go on your trip, it is often cheaper to rent a home than check in on a hotel and can save you hundreds.

Building wealth is a step-by-step process which requires your attention to details. However, you will get the hang of it after a while, and you will find it well worth it when it comes time to retire.

Save then invest

After a few years without debt and with regular deposits to your savings account, you may still find the money you have saved can hardly afford your dream retirement. So don’t just cut expenses. Find a way to expand the pie! Take on side work, turn a hobby into a business enterprise, or consult a financial professional about how to invest your money more effectively.

About the Author: Yuan Liu is a freelancer who is currently thinking about setting up a self-managed super fund (SMSF) and she finds very useful information and services from professional investment companies like Clime.

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