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3 Secrets to Retreat – The Motley Fool



Your ideal pension may involve a lot of travel, purchase of some major ticket items, and decades of worry-free, work-free days. But it will take a big reason to get there.

If you want to retire abundantly enough to reach your goals, start planning right away. Start with these three steps.

1. Start Saving As Early As Possible

When you deposit money into a departure account, you invest it in stocks, bonds and other assets that usually increase in value faster than money left in a traditional savings account. The sooner you start saving for retirement, the longer the money will have to grow in the account before you have to start pulling it. This extra time to grow can have a major impact on the value of your savings.

  Man with straw hat, sunglasses and rent around his neck holding a cocktail while sitting in the hammock.

Image Source: Getty Images.

Consider two people who both make $ 50,000 a year and plan to retire at age 65. They each add 10% of their earnings to retirement, but they start saving 25 and one starts in 35 years. Anyone who started saving 25 would have about $ 999,000 when they reached 65, assuming a 7% annual return. The person who started saving 35 would only have about $ 473,000 with the same return. There is a difference of $ 526,000.

Set up a retirement account if you have not already started making contributions, even if you can only save a few dollars a month. You can contribute up to $ 19,000 to a 401 (k) in 2019 or $ 25,000 if you are 50 or older, and $ 6,000 to an IRA or $ 7,000 if you are 50 or older.

2. Determine how much money you need for your retirement goals

You need an estimate of how much you want to spend in retirement to make sure you're saving enough. Start by determining the approximate length of your pension. Consider how long you think you will live and be optimistic. It is not unreasonable to think that you will live over 90 or even 95 if you are reasonably healthy. From this, you draw the age at which you plan to retire to find out how many years of living you will need to cover.

Then, summarize your retirement pensions, including housing, food, insurance, healthcare, utilities, travel, and any big-ticket items you plan to buy. Leave up any expenses you have today that you do not intend to take on a pension, such as child care. Once you have calculated your monthly expenses, this multiplies by 12 and then by the number of years of retirement. Don't forget to add 3% annually to inflation.

Your pension calculator will take care of this for you. It will also ask you to estimate an investment return. While you can see annual returns of 7% or more, it is best to use 5% to 6% to be conservative.

Once you have entered all this information, your calculator must tell you the total amount you need to save for the pension and how much you need to save per month to achieve your goal in addition to any money you expect from an employer 401 ( k) struggle, pension and social security schemes.

Create a "my Social Security" account to help you estimate your Social Security benefit if you don't already have it. What Social Security does not cover your expenses is what you have to save on your own.

3. Take advantage of employers-matched 401 (k) funds.

You wouldn't give up free money if someone sent you a check in the mail, but millions of Americans leave their 401 (k) matches on the table each year. About $ 24 billion in 401 (k) matches goes annually, according to Financial Motors. If that money had been claimed and invested, it could have been worth much more when workers were ready to retire.

If the employer offers a 401 (k) match, contribute at least enough to get the full fight. The only good reason not to do this is if your basic cost of living prohibits you from putting money away for retirement.

Be aware of your 401 (k) profit plan, especially if you expect to leave the company in the near future. The profit plan determines when employers' funds are yours to keep. Some companies may offer immediate profits, while others may require you to work for the company for a certain number of years before you keep any of the employer-funded funds. Or it can be a graded admission plan where 25% of employer-funded funds are yours to keep after one year, 50% after two years and so on.

You may be lucky and win the lottery or invest in the right investment, but the safest way to retire is to get the basics. By following the three steps above and carefully adhering to your savings plan, you should be able to save enough for the lifestyle you want.


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