The key to building up any retirement nest egg is to start as young as possible, even if that means making small contributions in the beginning. You’ll be surprised by how quickly the fund will grow, allowing you to create enough wealth to help you retire without having to continue working. Here are a few more tips to help you make the most out of your retirement savings.
Use Automatic Deductions
Once your account is set up, contact your employer to inquire about having your contributions automatically deducted from your pay and transferred into your retirement account. This will ensure you never forget to make your contributions. Additionally, the amount you contribute will be based on a percentage of your pay, so you won’t have to worry about a larger sum getting transferred into your account in a shorter pay period.
Take Advantage of Employee Match
More commonly known as a 401k, this is a program in which your employer offers to match your contribution up to a certain percentage. Essentially, this is free money that you can use to bolster your retirement account. However, every employer doesn’t offer this in their benefits package, so be sure to ask your employer if this is an available option.
Open an IRA
Whether or not your employer offers a 401k, it makes sense to also open an IRA. You may need a supplemental retirement account in place if your 401k maxes out and you need someplace to transfer your savings. Additionally, an IRA or a Roth IRA offer low-cost investment options that are beneficial in growing wealth over a longer period of time. In many cases, the contributions you make to an individual retirement account are tax deductible and the wealth your money earns in the account is usually tax-deferred.
No matter how old you are, it’s never too late to start a retirement account. It’s important to note that your contributions are limited year by year with $6,000 being the current limit. However, if you’re 50 or older, the IRS allows you to contribute an additional $1,000. To learn more about building wealth in a retirement savings account, a financial advisor can answer your questions and guide you in making wise investments.