A Refresher on Retirement Planning
As the end of summer approaches and children head back to school, many adults could take a moment for a refresher course in planning for retirement. Making the commitment to save for retirement in your employer-sponsored retirement plan is a wise move that puts you on the path toward reaching your retirement savings goals.
CRAM In the Savings – The more you save for retirement now, the more you may have to live on in the future. Whenever you can, increase the percentage of pay you contribute to your retirement plan. One way to accomplish this is to increase your contribution percentage by 1 or 2% each year or every time that you receive a raise. Since this money will be taken directly out of your paycheck, you may not even miss it. For example, if you’re making $40,000 per year, 1% of your paycheck is only $7.70 per week. And if you’re contributing this amount on a pre-tax basis, you may see closer to only a $6.00 reduction in your take home pay. If you’re not sure if you can afford to save more, take a close look at your budget. Often, cutting back on a few extras each week can free up additional retirement savings.
Don’t SKIP Out on Saving – There may come a time when you’re tempted to stop saving for a while, especially during periods of frustrating market volatility. You may want to use this money during a financial difficulty or for a large purchase. Taking even a short break, however, could have a significant impact on your ability to meet your retirement savings goals. Instead, look to other sources when you need extra money so you can continue contributing to your plan. Consider creating an emergency fund that you can access if the need arises. That way, it will be easier to stay on track with your retirement savings.
STUDY Your Strategy – When you’re investing to reach a long-term goal, anticipate that there will inevitably be periods of poor investment performance. It’s important to not let your emotions drive your investment decisions. Moving your money in and out of investments because of short-term fluctuations is usually not smart investing. Buying when prices are at their lowest and selling when prices are at a high point – “market timing” – is very difficult. You are better off sticking with a long-term investment strategy that fits your risk tolerance and time frame. Creating a well-diversified portfolio that includes both stock and bond investments may provide you with the best opportunity to attain your retirement goals.