Saving for retirement is one of the most important financial goals you can have. By saving for retirement, you can ensure you have enough money to live comfortably in your golden years.
With that said, it can be hard to plan for that far ahead, even nerve-racking. Because of this, we’re happy to break down some essential tips for saving for retirement effectively.
Tip 1. Make a Plan
It may seem obvious, but taking the first step is the first step, and often the most difficult. Start by arriving at how much money you need to retire comfortably, how much you can save and invest each month, and how long you have until retirement.
Once you have established numerical clarity, everything else will make sense. You can track your progress, measure your success, and adjust as needed.
Tip 2. Game, Set, Match
One of the most common and effective ways to save for retirement is to contribute to an employer-sponsored plan, such as a 401(k). A 401(k) allows you to defer taxes on your contributions and earnings until you withdraw them in retirement. But the best part is that many employers offer a matching contribution, which means they will add a percentage of your contribution to your account up to a certain limit. This is free money, people. Don’t leave it on the table.
According to a study by Vanguard, only 79% of eligible employees participated in their employer’s 401(k) plan in 2020. This means that millions of workers are missing out on a significant source of retirement income.
Tip 3. Diversify Your Portfolio.
Another key to successful retirement saving is to invest your money wisely. It would help to diversify your portfolio across different asset classes, such as stocks, bonds, and cash. Diversifying can help reduce your risk of losing money when one asset class performs poorly. It also increases your chances of earning higher returns over the long term.
By avoiding putting all your eggs in one basket, you can adjust your asset allocation based on age, risk tolerance, and time horizon. For example, as you get closer to retirement, you may want to shift more of your portfolio from stocks to bonds, to preserve your capital and generate income.
Tip 4. Maximize Your Tax Benefits.
Saving for retirement can also help you save on taxes. Depending on the type of retirement account you choose, you can either deduct your contributions from your taxable income now (traditional IRA or 401(k)) or enjoy tax-free withdrawals in retirement (Roth IRA or 401(k)). Either way, you can reduce your tax bill and keep more of your money working for you.
Tax benefits are an excellent incentive for saving for retirement. They can significantly affect your net worth and income over time. By choosing the right type of account for your situation, you can optimize your tax savings and boost your retirement income. You can also use other strategies, such as contributing to a health savings account (HSA), which offers triple tax benefits: tax-deductible contributions, tax-free earnings, and tax-free withdrawals for qualified medical expenses.
Tip 5. Starting Early is Good
The earlier you start saving, the more time your money has to grow and compound, which is when your earnings generate more earnings over time. Starting early and saving often can make a huge difference in your retirement savings. Even a small amount can make a big difference over time.
-but It’s not everything.
It’s never too late to start. Another way to save more for retirement is to take advantage of catch-up contributions. These are additional amounts that you can contribute to certain retirement accounts if you are age 50 or older. Catch-up contributions can help you boost your retirement savings and make up for any lost time or missed opportunities.
Tip 6. Do the Hustle
We know, we know. You’ve been working your whole life, and you want to relax. But hear us out. What if you could find a way to make extra money doing something you actually like? Something that doesn’t feel like work at all. The right side hustle can bring fulfillment as well as additional income.
Tip 7. Use MoneyLion’s Auto Invest feature.
Another way to set aside money for retirement is to use MoneyLion’s Auto Invest feature, which automates your investing and makes it easier and more convenient. With Auto Invest, you can set up a recurring deposit from your bank account to your MoneyLion investment account and let MoneyLion handle the rest.
MoneyLion will automatically invest your money in a diversified portfolio of low-cost ETFs based on your risk profile and goals. You can also enjoy features such as fractional shares, dividend reinvestment, and tax optimization. MoneyLion’s automatic investing diversifies your portfolio, optimizes your returns, and gives you a head start on retirement.
Start thinking about your future self today. You deserve it.