When you are in your early 30s, retirement savings do not probably belong to the list of your priorities. Nevertheless, they should become the top one the moment you receive a greeting card on your 40th birthday.
Of course, the wisest thing would be to arrive at this idea as early as in your 20s, although late is still better than never.
To open a retirement account is exactly what you are to do first and foremost. Roth IRA seems to be the best option – all the contributions are made after tax, which is why money generated within this account is never taxed again. In other words, Roth IRA is a chance to receive a tax break in your retirement. Traditional IRA, for comparison, will allow you to make contributions with pretax dollars. Although you will have to pay income tax when you retire. In such a way, IRAs give you a tax break while you are saving up, while Roth IRAs makes you exempt from taxes when you retire.
And still, retirement account is not the only thing you are to take care of. What else should you take into consideration?
Get Rid of Your Debts
Try to pay off all your debts, be it a credit card debt or a car loan. If you have multiple debts, there are two strategies you can apply. On the one hand, you may start with a debt with the highest interest rate. This is quite wise as this will allow you to save more in the long run. On the other hand, you could start with paying off small debts as quick results could encourage you to cope with more complicated issues.
Mortgage debt is a matter of especial importance. Here are two options: you may either make extra payments to get rid of this debt as soon as possible or invest in retirement plan and keep making small mortgage payments on a regular basis. This depends on the mortgage stage you are currently in. If it is an early stage, make extra payments to cover the interest on the amount you borrowed. However, if you are in the final stage of your mortgage, saving for retirement would be a better option.
No college funds
It’s important to give your children good education as this will open them path to successful life and so on. But you still need to think about yourself. Much better option would be if they take a student loan. Because after all, they will have an entire life to pay it off. What is more, taking a student loan will not only give your kid an opportunity to study and find a good job in future, but will also help him or her develop saving and investing habits, which is definitely a great thing.
There are two more arguments against funding your children’s education. On the one hand, they will have an opportunity you’ve already missed – to start saving for retirement in their 20s or 30s. On the other hand, they actually CAN take a student loan, while you simply CANNOT take a retirement one. Finally, having retirement savings is itself a great investment into the future financial security of your children.
Keep in mind that the more sources of income a retiree has, the more secure he or she feels. For obvious reasons, it is better to investigate all the available options in advance. One of them are payments from Social Security Administration which are guaranteed to almost all Americans. Another option are retirement accounts such as 401(k)s, IRAs and Roth IRAs, of course. Pension is another revenue stream, although only a comparatively small group of workers has them now. One more option are stocks, mutual funds and ETFs. Although it is safer to keep money in bank accounts, CDs and money market funds, these alternatives have a potential to bring much more income. Find more details at Investopedia. If you still think it is too complicated for you, much simpler tool is high frequency trading – Glenmore Investments would be a good place to start. Finally, even in retirement you can work part-time. After all, it is a great opportunity to socialize.
One of the most common reasons of personal bankruptcies is an unexpended calamity. Nevertheless, you still have an opportunity to reduce the risks if you buy an adequate health insurance. This may not only save you a fortune one day, but will also let you sleep with a quiet mind.
Along with that, term life insurance is a must-have if you have any dependents. Although whole life insurance isn’t a good idea, the moment your dependents will start to earn their living themselves is definitely a good option to consider.
Retirement money can be difficult to come by, but one way to pad your retirement income is with a reverse mortgage. Unlike traditional loans which require monthly repayment, reverse loan terms dictate that you will have plenty of time to repay what you owe. There are no immediate repayment requirements. In fact, among the many reverse-mortgage advantages is the benefit of receiving money each month, if you choose ongoing payments as opposed to a lump sum. You will also have the peace of mind of knowing that you will remain the owner of your home until you pass away or choose to leave it. There will be no need to worry about missed payments leading to defaulting and being evicted.
In such a way, even your early 40s are a good moment to start saving for retirement. At least if you approach the issue wisely. The main thing is not to put the matter away for later and start taking care about your future right now.