Saving For Retirement

RETIREMENT – ARE YOU SAVING FOR IT?

The years of company-funded pensions and employer-funded medical coverage after retirement are gone or disappearing. Social Security benefits may be cut and the startup for withdrawal of Social Security benefits has been pushed forward or delayed for those in future generations.

Many people are finding that they must work longer and begin making life style changes in order to make ends meet and to plan for retirement or possible job loss.

For those people who have lost their jobs, their way of life has changed drastically. For those still in the work force, retirement planning has shifted and has become the responsibility of the worker as companies move toward self-directed 401(k) plans for the primary retirement vehicle. Many companies are eliminating their 401(k) match which leaves workers with the task of making the most of their own investments. Self-directed 401(k) plans, which are savings plans where the money is deducted from the employee’s salary, mean the employee must decide not only how much money to invest, but how to invest that money. This takes a lot of know how; a lot of commitment to learning about stocks, bonds, and mutual funds; and includes a complex set of factors involving decisions that change as one nears retirement. Be Committed To Saving. Even small amounts add up!.

The basics of planning for retirement in this economy center around two things: watching what you spend; and saving money. People need to be committed to saving money. Don’t wait to start contributing to a 401(k) plan and to a money market account. Even small amounts per month will add up nicely over time. If your company doesn’t offer a 401(k) plan, go to your bank and start up an IRA. While you’re there, set up a money market account for money that can be withdrawn when you need that extra amount of cash for some immediate expense.

If you have a 401(k) plan, keen attention to the mix of your self-directed investments will require regular attention to your holdings and you will need a greater emphasis on changing to more conservative investments as you age. Don’t be afraid to get the help of a financial advisor as you tread these often murky waters.

Advisors can be found in many ways. Recommendations from friends and family can be very important when a personal financial advisor is needed. Fee-only advisors (those who don’t get a commission on products they recommend) can be found on the National Association of Personal Financial Advisors website at: http://www.napfa.org/ Many companies also have a financial advisor to help with employee 401(k) decisions. Always ask at your workplace for the availability of an investment expert who is in charge of the company’s 401(k) funds. But above all, become knowledgeable about your investments and learn as much as you can about where your money is and how it is invested.

As you learn about investing for retirement, you know that there are certainly perils to face as one invests in the stock market. Even with an active management of your portfolio, market downturns will happen. There are no guarantees when investing in the stock market. Despite the risks involved at this time after the losses of 2009, people should avoid the urge to stop contributing to their 401(k) plans. Stock market investing is still an important strategy for investors because stocks offer one of the best ways to avoid losing ground to inflation over time.

The time to begin saving for retirement is NOW. If you haven’t begun contributing regularly to an IRA or 401(k) and a money market fund, now is the time to start. Whether you have 30 years or 30 months until you retire, know where you stand and know whether you may need to work longer and delay retirement while you save a bit more money. A healthy view and control of your spending habits will give you a means to cut back on frivolous expenses and provide a way to save more money.

Some tips that will help your financial stability and further your retirement planning are:

1. If your company matches 401(k) funds, always contribute enough money to your 401(k) to receive the company match.

2. Pay attention to your mix of investments. Those people that were too heavily invested in stocks when the market took a turn for the worse last year lost much of their savings. You should change your investment mix over time, becoming more conservative as you near retirement.

3. If you are not a savvy investor, seek the help of a reliable financial advisor.

4. Don’t look at your stock portfolio every day. With the ease of access to most 401(k) plans, people can check balances on an every day basis. Don’t be tempted to fall into this routine. You’re more apt to make panic decisions when the market takes a downturn. Over time, the market has historically been one of the best investments. Put your money in the market for the long term.

5. Learn about Roth IRAs and 401(k) plans. You don’t get the tax benefit of the 401(k) upfront, but putting after-tax dollars into a Roth 401(k) will mean you won’t be paying taxes on your withdrawals in the future when you most need the funds.

6. Be satisfied with what you’ve got and don’t be pressured to upgrade, replace and renovate your life. Differentiate between your wants and your needs. A sense of satisfaction can mean less spending and this paves the way for MORE SAVING.

Some Web sites that can help:
http://money.cnn.com/magazines/moneymag/money101
http://www.mymoney.gov/retirement.shtml
http://www.aarp.org/money/


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1 comment:

Anonymous said...

All good advice! I especially like the last one. Too many people forget what they want is not always what they need.

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