3 simple (but important) tips for saving for retirement
It is recommended you save 10% of your after-tax income for your future. But, most people only hear about contributing to your employer-sponsored retirement plan (such as a 401(K)). If you have an employer who does not offer a plan OR if you do not have an employer, here are three options for saving for retirement.
I am specifically not including an employer-sponsored retirement plan in this list because they are designed to help the employer’s bottom line, not yours. The recommendation for employer-sponsored retirement is to only contribute what the employer will match and nothing more.
1. Make saving automatic.
Move 10% of your after-tax income to an account designated specifically for your future before you start spending any of it. I labeled mine “FUTURE ME”. As soon as a payment clears the bank I transfer a percentage to my bucket accounts. From my FUTURE ME account I can purchase real estate, invest in the stock market, or purchase bonds, certificates of deposit, annuities, bitcoin, etc.
I personally do not label these investments “retirement” because once you label them “retirement” the government tells you when you can use your money and penalizes you if you do what you want instead of what they tell you you can do with it. But, the point is that these investments will be available for my use for the rest of my life.
2. Know what you want to invest in BEFORE earning the money.
One of the great excuses for procrastination is that you have to do research. Eliminate the excuses by doing the research ahead of time so you know where the money will go when you reach the balance you need to invest.
3. Know your tax laws.
There is no excuse for not knowing the rules you need to play by.
Do a google search. Find reputable sources for articles. Pay a financial advisor or planner to help you (just make sure they are independent and have no incentive to steer you towards a product they will make a commission on).
It is better to know up front how you will be taxed for withdrawals BEFORE you make the investment. It can make the difference of thousands of dollars.