5 Ways to Maximize Your Retirement Funds

No matter what occupation you choose, the ultimate goal is to find a job that you love that also provides you with a means of supporting your lifestyle and impending retirement in the future. However, it can sometimes be difficult to pinpoint exactly how much money you need to put away and what you should invest in to reach that goal. Once you’ve determined this, it then becomes important to maximize your return on these funds.

From job-sponsored savings plans to your own ideas, here are a few ways you can maximize your retirement funds without adding too much risk.

Take Advantage of Free Money

Most employers today offer 401(K) plans and, perhaps, even a pension plan. To truly gain an advantage in your retirement account, make sure to sign up for these programs if. In particular, the 401(K) plan is a savings account that is typically matched by your employer. If your employer does a contribution match, you should sign up for your 401(K). It’s essentially free money. Even if it’s only a small percentage of your weekly paycheck, it’s a great start to saving and can’t be withdrawn without penalty.

Start Early

Depending on your age, your retirement contribution amount will vary. Nevertheless, it’s important that you start saving as early as possible. The reason for this, without getting into the time value of money too much, is that compound interest will take effect on your savings and give them more time to grow. This translates into a substantial amount of savings over time.

You can also start small and change your contribution amounts to suit your current financial situation. Whatever the amount you decide to save, you’ll eventually get used to it coming out of your paycheck, and you won’t miss it at all. Plus, you’ll have a sizable savings account when you are finished.

Reduce Your Taxes

No one likes taxes, especially if they are a drain to your retirement aspirations. The best way to make your money work for you is to find a way to reduce your taxes on your retirement accounts. To achieve this, you may want to have a mix of tax-deferred and tax-free accounts. Try mixing your tax-deferred accounts, such as a 401(K) or traditional IRA, with tax-free accounts such as a Roth IRA. The tax-deferred accounts will accumulate money at a faster rate than other accounts because it doesn’t have the burden of taxes.

Annuities are a financial tool that can also help you manage your money influx and tax situation. You may ask yourself, “How do different types of annuities work?” Do some research and remember that an annuity calculator can help you see how much you can benefit or earn from the proper annuity. However, be aware that some of these accounts will be taxed upon withdrawal. If you manage it correctly, you can avoid taxes draining all of your money and leave more for yourself.

Diversify Your Portfolio

Financially speaking, never have all your eggs in one basket. To truly safeguard yourself against the ups and downs of the marketplace, you must place your money in several different investments. Also, you may need to have liquid assets in case you need quick cash for a purchase or an emergency.

Aside from the obvious investments, such as a savings account, consider several of the following investments as well. These include certificates of deposit, bonds, stocks, mutual funds, treasury bills, and other investments. The key is to hedge, or counteract, the effects of potential losses. By doing this, you can be set for life’s little bumps in the road and maximize your savings at the same time.

Overcome Temptation

When you start to see your balances get larger, it can be tempting to make small withdrawals. However, it is imperative that you know the damage that even small withdrawals can cause to your savings. Utilizing compound interest principles, a $5,000 withdrawal can end up costing you almost $100,000 over a 35 year period if the interest rate is at 8 percent. So rather than buying the latest gadgets with your retirement savings, use your expendable income to make those purchases. You’re retirement account will thank you in the future.

Saving for your retirement can be a stressful part of adulthood. However, if you take the necessary steps, you can assure yourself of a stress free future. Following the aforementioned rules isn’t necessarily as hard as it seems. With just a bit of discipline and a little bit of reading and educating yourself, you can ensure that you won’t have a problem in the future. All you’ll have to do is sit back and enjoy the fruits of your labor.

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3 thoughts on “5 Ways to Maximize Your Retirement Funds

  • That’s quite a comprehensive collection of good ideas you have there. The only thing I would add would be being informed about fees and how they impact your rates of return. There’s nothing wrong with fees per se, but high fees relative to your rates of return can really eat into your growth over the long term.

  • All great advice, Sandy! If you own your home you’ll want to have it completely paid for by the time you retire. And if it increases in value (not guaranteed these days) don’t let the higher value give you “the wealth effect.” That’s what many people feel when their house is valued higher. Then they go out and spend more money because they feel wealthier. Bad move! Your house can go down in value as well. If you want to cash in on a higher valuation, sell and move to a cheaper place!

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