Smart Ways to Build Towards Retirement

Retirement may be the furthest from your mind at this point in your life and career, but with a blink of an eye it won’t be long before you are walking away from the workforce to enjoy the later years of your life.  In order to make ensure that you have enough built up by the time you retire, it is important to make smart financial decisions early on so that you are not scrambling to fund your retirement when it’s too late.

Evaluate Target Goal

Not only care we not live solely off social security, but we have always heard the rumors that it may not even be there by the time we are of retirement age, so it is important to have other accounts accumulating funds for these next few decades.  It is good to play around with retirement calculators so you can see what you are currently contributing, what you think you need, and then see the eye-opening realization that you may come out short if you continue along the path that you are now.  Come up with a target goal and try and make the necessary adjustments.

Maximize Contributions Early

They key to ensuring that you will have sufficient funds are not only maximizing contributions, but also as early as possible so the balance can continue to compound.  Every year you miss out on contributing, will set you back significantly.  If your employer matches 401(k), contributions, you should at least be contributing that much, as any less will be leaving money on the table, and free money I might add.  From there, it is a good idea to increase contributions every year, so that little burden is felt, and yet you are still increasing more.

Keep a Reserve on Hand

You never know what happen in life, so it is a good idea to be prepared as best as you can.  Keeping a cash reserve on hand, typically a few months’ worth of total expenses as a rule of thumb, will be a good way to have available cash if needed.  You never know when your car could break down, you need to replace your furnace, or even worse, if you lose your job and you need money to be able to float for a month or two while you find a new job.  A reserve is great to have so that way you do not have to put on a credit card and worry about trying to repay.

Eliminate Unnecessary Spending

While I mentioned that retirement may be the furthest from our thoughts, we need to start getting in the mindset to eliminate spending waste and put that savings into our retirement.  If you figure that $200 in spending in a given month on nonessential items could be put into your retirement account, growing at 6% for the next 30 years, could be thousands that you are missing out on.  Sure, we all enjoy shopping, but the more you spend now, the less you will be able to enjoy when you don’t have to work!


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