Okay, here’s the deal: Retirement might seem like it’s far off in the future (and you’re probably right, it might be decades away)—but that doesn’t mean you shouldn’t be thinking about it right now! In fact, one of the most important things you can do for retirement is starting early.
Need more proof? Check out the article 7 Reasons to Save for Retirement Early. Whether you plan to start saving early or not doesn’t take away from the fact that you should be looking for ways to secure the bag for retirement now. And when I say “secure the bag,” I mean making sure you’re financially prepared when it’s time to retire.
Not sure where to start? Keep reading! I’ve got you covered. Check out these 6 additional ways to secure the bag for retirement.
#1 Start Contributing More to Your 401k
If you’re lucky enough to have an employer that offers a 401(k) or any other retirement plan, then take advantage of it, especially if your employer matches some of your contributions! As of the writing of this article in early 2021, the IRS annual contribution limit for a 401(k) is $19,500.
Your goal should be to hit that number! This is the best way to secure the bag for retirement!
That becomes even more true if your employer offers some sort of match. The match means that whatever you contribute to your 401(k) or retirement plan will be matched by your employer, up to a certain percentage or dollar amount. That means you get free money—and we’re not in the business of turning down free money, are we?
#2 Open an IRA and Contribute
Sometimes an employer won’t offer a 401(k) or retirement plan, but don’t worry! There’s an alternative: the Individual Retirement Account, or IRA. Anyone can open an IRA! They’re offered through most financial institutions, as well as roboadvisor companies like Betterment and Digit. In fact, my own IRA is through Betterment—and you can get free management for a year if you sign up with my link!
You can contribute to both a 401(k) and an IRA, but the annual contribution limit on the IRA as of the writing of this article is $6,000. If you have a 401(k), it’s best to max that out first and then focus on building up your IRA.
However, if you don’t have a 401(k) or other retirement plan, an IRA is the next best thing to secure the bag for retirement. Don’t forget that once you make contributions to your IRA, you need to invest that money so it will grow!
#3 Rollover Any Old 401ks
401(k)s and IRAs are the best tools for securing the bag for retirement, but there are a few other ways to make sure you’re taken care of. The first thing you need to do is roll any old 401(k) plan into a current or new 401(k).
While it’s nice to know you have an old 401(k) sitting around somewhere, you’re no longer able to make contributions to it after you leave your employer. That means you’re not going to see the gains you’re so worthy of! Sure, the money will grow over time, but to see true compounding growth, you need to keep funding it. The only way to do that is to roll the balance over into your current 401(k).
Fortunately, completing a 401(k) rollover is a relatively simple process! Contact your old 401(k) plan provider and get any documentation you need to roll it over into your new plan. Contact your current 401(k) provider to give them a heads up and ask about any steps you need to take so they can process the rollover.
Once all your 401(k) plans are rolled into one, you can get back to maximizing your retirement savings—and you’ll have one less account to keep track of!
#4 Focus on Becoming Debt Free
You might be scratching your head at this one, but hear me out! When it comes to securing the bag for retirement, of course, the more you have saved the better.
However, we also want to make sure life is as easy as possible during retirement. That means getting rid of all your debt before you retire. I guarantee you that the last thing you’ll want to be focused on during retirement is paying off debt!
Prioritize getting rid of all of your debts while you’re still working and generating income. Start by paying down all high-interest debt like credit cards and personal loans. Then shift your focus to any secured debt you have, like auto loans or mortgages.
The faster you can pay off your debt, the more time and money you’ll have to put into your IRA and other investment accounts!
#5 Give Your Investment Options a Refresh
If you want to make the most bang for your retirement buck, you need to make sure you’re invested in the right options in your retirement portfolio. If I lost you, please come back! Let me break it down: Your retirement plan (such as a 401(k)) is made up of investments. If you didn’t pick the investments yourself, then you were automatically placed in a plan.
The good news is, you’re invested! The not so good news is that you might be leaving money on the table if you’re not invested in the right options based on your age and time remaining in the workforce. Check out the articles How I Picked My 401k Selections and How to Research Your 401k Options for some guidance on what to look out for.
#6 Consider Going the ROTH Route
If you’re unfamiliar with the term ROTH, you’re in the right place. A ROTH account, or ROTH IRA, involves contributing post-tax funds to a retirement plan (unlike a regular IRA, which uses pre-tax dollars). What this basically means is that you’ve already paid taxes on whatever goes into the ROTH—so when it’s time to retire, you don’t have to worry about paying taxes on that money. If you’ve already completed steps 1-5, I highly recommend this route!
Take me as an example: I already know that when I’m ready to retire, I’ll likely be in a higher tax bracket than I’m in now. That means I could wind up paying more in taxes at that time. No thanks! I’d rather take my chances and pay tax on that money now. Read Retirement Savings: ROTH vs Traditional for more insight on this concept.
Girl, let’s secure the bag for retirement! The last thing on your mind at retirement should be money worries! When you have what you need in the bank, you can spend your later years doing whatever you’d like! That’s what I’m talking about. The earlier you start, the easier it will be.
Have you started securing the bag for retirement? What questions or tips do you have to share? Post your thoughts and questions in the comments section below!