King bell
VIP Contributor
The most common financial goal for Americans is to put money away for retirement. As with any long-term investment, putting money away for the future can be difficult if you're not properly educated on the process. Incompetent investors have lost significant sums of money in mutual funds, stocks, and other investments due to mismanagement or lack of knowledge about the business itself.
Luckily, those days are over! In this post, I'll teach you how to put away money efficiently and effectively by starting a 401(k) plan at work or setting up ACH deposits with your bank account if you're self-employed.
1. Determine the amount you need to save for retirement. It's important to have a target amount in mind before you start to put money away. One way to determine this number is by using your estimated retirement income from Social Security, your Pensioned Income from other forms of employment or self-employment and any Additional Income that you may be able to receive as an entrepreneur (such as royalties, gross sales commissions or IRA distributions). Whatever number it is, make sure it is realistic! Once you've determined how much money you need, obviously you'll need to figure out how much savings will get you there.
2. Decide on a savings rate. If you're unsure of your finances, I suggest that you choose to save approximately 10% of your income before taxes, preferably with the contribution coming from pre-tax (i.e. invested) income and not pre-tax benefits such as a flexible spending account or health savings account.
3. Make an investment plan similar to any other long-term retirement plan. You should set up a 401(k) plan with your employer or, if you're self-employed, set up an ACH deposit with a bank account that has a competitive interest rate. Make sure that you have the option to invest in mutual funds or stocks. Again, make sure that you choose an investment interest rate similar to any other long-term investment (such as a Certificate of Deposit).
4. Check in on your retirement accounts occasionally. After your initial deposit, check on your retirement account from time to time to ensure optimal growth and contribution rates from your employer and/or you yourself. If you are not receiving any matching contributions from your employer, it may be a good time to open a Roth 401(k) with your employer. If you're self-employed, you should check in on your investment accounts fairly regularly.
5. Don't forget to check in on your retirement accounts once a year! Once a year, after the end of the tax year when you file your taxes - make sure to do a quick check of your retirement accounts. Review AVERAGE balance and investment rates. If you're at or above target #1, great! If not, figure out what actions need to be taken to correct this issue before it becomes too serious (i.e., missing deadline for deposit or total loss).
Luckily, those days are over! In this post, I'll teach you how to put away money efficiently and effectively by starting a 401(k) plan at work or setting up ACH deposits with your bank account if you're self-employed.
1. Determine the amount you need to save for retirement. It's important to have a target amount in mind before you start to put money away. One way to determine this number is by using your estimated retirement income from Social Security, your Pensioned Income from other forms of employment or self-employment and any Additional Income that you may be able to receive as an entrepreneur (such as royalties, gross sales commissions or IRA distributions). Whatever number it is, make sure it is realistic! Once you've determined how much money you need, obviously you'll need to figure out how much savings will get you there.
2. Decide on a savings rate. If you're unsure of your finances, I suggest that you choose to save approximately 10% of your income before taxes, preferably with the contribution coming from pre-tax (i.e. invested) income and not pre-tax benefits such as a flexible spending account or health savings account.
3. Make an investment plan similar to any other long-term retirement plan. You should set up a 401(k) plan with your employer or, if you're self-employed, set up an ACH deposit with a bank account that has a competitive interest rate. Make sure that you have the option to invest in mutual funds or stocks. Again, make sure that you choose an investment interest rate similar to any other long-term investment (such as a Certificate of Deposit).
4. Check in on your retirement accounts occasionally. After your initial deposit, check on your retirement account from time to time to ensure optimal growth and contribution rates from your employer and/or you yourself. If you are not receiving any matching contributions from your employer, it may be a good time to open a Roth 401(k) with your employer. If you're self-employed, you should check in on your investment accounts fairly regularly.
5. Don't forget to check in on your retirement accounts once a year! Once a year, after the end of the tax year when you file your taxes - make sure to do a quick check of your retirement accounts. Review AVERAGE balance and investment rates. If you're at or above target #1, great! If not, figure out what actions need to be taken to correct this issue before it becomes too serious (i.e., missing deadline for deposit or total loss).
