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How Can You Save $1 Million For Your Retirement?

At 25, retirement may seem eons away; something that does not deserve any time or effort on your part. Wrong! This is the right time to begin thinking about retirement- if you want to live comfortably during retirement. Too many people leave the retirement plans for “later,” only to wake up with next to nothing on the eve of their retirement. If done early enough, planning correctly can enable you to retire from your job even earlier than projected. Here are a few tips that will help you achieve your targeted retirement savings amount:

1. Start Your Retirement Plan with 401(k)/ IRA

As soon as you get a job, contribute to your company 401(k) plan so you can take full advantage of your employer’s matching contributions program. Go for the maximum permitted contribution; motivate yourself by imagining your money instantly doubling with each matching deposit from your employer.

If you do not have a job or your company does not offer a retirement plan, do not wait until you get hired by a company that does. Instead, fund an IRA account privately, through your financial institution, and start building your retirement nest egg as early as you can.

Even minimal contributions, made consistently over time, can add up to big savings when we consider that contributions will be made over approximately 40 years; and that those contributions will accrue interest while invested. Along with weekly or monthly contributions, you should consider making lump sum contributions, whenever possible, to reach the maximum contribution cap each year.

2. Go for Stock Options

The best way to have your money work for you is through stock options. Find a financial professional that handles mutual funds (they carry the lowest risk) and invest all your funds (earmarked for savings) in stock. Bonds are also good (and safe) but they are best reserved for when you are investing for less than 10 years. Anything beyond, and you cheat yourself out of generous profits by playing for quick gains.

3. Keep a Close Eye on High-Interest Debts

What would you say if someone threw away $3 every time they spent $10; maybe it does not seem like much when you are looking at a rather small amount of $10. However, what if the amount is multiplied to $1,000? And what they were throwing away was $300; or $10,000 and the amount we are referring to is $3,000, simply thrown away? We could all agree that the person is insane- when you look at it as a lump sum. The problem is- consumers do this every day as a slight trickle- when they use credit. You are probably doing this as we speak, unintentionally.

How you ask? This is exactly what you are doing when you have a rolling balance on credit cards. You are paying at least 3% per month compound interest; that means by the end of the year you would be paying more than 40% on whatever money you have borrowed. This money is essentially thrown away; your hard earned money given to a wealthy financial institution. Does this really make sense? Shouldn’t you have the privilege of enjoying every dollar you earn?

Therefore, you need to keep a very close eye on credit cards and other high-interest debts. The best option is to stay within your means and use credit cards only in dire emergencies. If you can’t pay for it immediately find a way around “wants,” and stick to “needs.”

4. Set Up an Emergency Fund for a Rainy Day

What if you lose your job tomorrow and are unable to get one for about 3-6 months? How would you manage? What if your job derails from its current success or suffers heavy losses and is forced to downsize? What would you do for money? What if you have an accident or sudden illness and you cannot work for a few months? There are many “what ifs” in life; you cannot prevent most of them, but you can be ready to face them.

Set up an emergency fund preferably using an online bank because these banks offer higher interest rates on savings accounts than contemporary banks. Your savings should equate to 6-12 months of earnings. You should be strict with adding funds to this savings account and even stricter with not taking any money out.

Following these steps, it is very possible to enter retirement with a million dollars in savings. That money can be reinvested in part and change the remainder of your life along with the lives of your family. Following these steps will also allow you to retire when you choose. You will be able to enjoy the remainder of your life without financial headaches or placing financial burdens on your loved ones.

7 Principles to Follow For A Healthy Financial Status At Retirement

How do you know you are saving enough so you will be comfortable when the time comes for your retirement? Will you be able to fully support all of your needs during retirement? Here are some critical points that need to be followed in order to ensure that you are financially secure during retirement.

1. Save a minimum 15% of your gross salary each pay period

It was previously recommended to save about 10% of your gross income for your retirement. However, with the upward spiraling prices on consumer goods, health care and the general cost of living, it is wiser that you raise the minimum a notch higher to 15%. This amount can and should include the employer’s contributions, if any. If you cannot (or feel you cannot) contribute that amount from your current salary, consider taking a second job (part- time) and contributing the entire check into retirement savings. The main objective is to start saving.

2. Contribute the maximum possible to the 401(k) plan

Anyone who is younger than 50 years of age can contribute $16,500 to their 401(k) plan in 2011. This is the maximum you are eligible to contribute; this is the same limit that was set in 2009 and has remained unchanged since. Since tax laws are constantly changing it is important to stay abreast of contribution laws and make changes to your saving plans accordingly.

3. Take advantage of the “catch up” contribution

You are allowed to contribute a “catching-up” amount to your 401(k) plan once you are 50 years of age. Make full use of this opportunity as this means that you can still achieve your goal of financial self-sufficiency by the time retirement rolls around. The maximum amount that can be contributed toward “catch- up contributions” is currently $5,500, which is in addition to the regular (and maximum) $16,500 yearly contribution.

4. Contribute to both 401(k) and Roth 401(k)

If your employer provides both these retirement plans, you could (theoretically) contribute to both. However, the maximum you and your employer can contribute is still $16,500 until you are 50 and $22,000 after 50 years of age. Do not be disheartened that there is no tax deduction for Roth contributions; the tax benefits are offered at the time of retirement. Also, it is worthwhile to note that there is no income limit when you contribute to a Roth 401(k) – unlike Roth IRA.

5. Aim at saving (for retirement purposes) an amount equal to 10 times your last salary

How much should be saved for retirement? To be financially secure there should be a savings equal to about 10 times your last earned yearly salary. It is imperative that you set a realistic goal for your retirement savings. It is a fact that most people cannot live during retirement with less than that amount. Retirement savings are essential for maintaining your style of living, paying bills, covering medical costs and all other miscellaneous expenses through the remainder of your life. Plan for retirement methodically and stick to the plan with no deviation.

6. Take calculated steps if you are 10 years or less from retirement

Your last chance to make up for the time lost (and the money that should have been saved) is when the timeline reaches 10 years from the D-day. This is the last opportunity to make significant contributions for retirement. Here are a few suggestions to use in order to generate extra retirement savings:

- Choose to work a few more years past the retirement age (emergency measure, if all else fails)
- Use the “catch-up” contribution clause for adding funds to your 401(k) in a hurry
- Invest aggressively in stock options
- Look for additional income to save more money such as a profitable hobby, second job or a home based business
- Eliminate expensive luxuries(such as eating out, maximum cable packages and paying retail for everything) and use the money that is saved towards retirement savings

7. Increase your retirement benefits by postponing your claim for Social Security benefits

For each year, post your retirement age, that a claim for social security benefits is not made until the age of 70, there would be the benefit of an extra 8% increase in your yearly Social Security benefits. While for some it may not be feasible to make this postponement, if you are able, this benefit should be greatly considered. The 8% increase can result in a considerable amount of money.

Saving for retirement can be done at any age. It is important to design a plan, stick to it and resist the temptation to dip into your retirement savings. You must start saving for your retirement today, in order to live comfortably tomorrow.


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