5 Expert Tips for Saving for Retirement

Really Quick, I want to thank you for getting to this point and having checked out my previous posts on creating a budget and saving a 3-6 month emergency fund those first 2 steps can be difficult, but worth it.

Are you concerned about your retirement savings? You’re not alone

I was too until I took action and started my own Roth IRA years ago.

And with the help of M1 Finance, it’s never been easier to start investing for your future.

In fact, by using my referral link, you can even earn a bonus when you sign up.

According to a recent survey by the Employee Benefit Research Institute, only 64% of workers say they are currently saving for retirement.

With longer life expectancies and increasing healthcare costs, it’s more important than ever to start saving early and make the most of your retirement investments.

In this article, I’ll share five expert tips for saving for retirement that have helped me build a secure financial future.

And with the user-friendly tools and resources offered by M1 Finance, you can easily implement these tips and start investing for your own retirement.

So let’s dive in!

Tip #1: Maximize Your Contributions to a Retirement Account

Once you have saved for 3-6 months of emergency funds, maximizing your contributions to a retirement account is one of the easiest and most effective ways to save for retirement.

There are various types of retirement accounts with unique features and benefits that individuals can choose from.

In addition, I have written an article that covers savings for 3-6 months.

Here are some of the most common types:

1. 401(k): This is a retirement account offered by many employers that allow employees to contribute a portion of their pre-tax income to the account.
   Employers may also offer matching contributions, making this a popular choice for retirement savings.

2. Traditional IRA: An Individual Retirement Account (IRA) that allows individuals to contribute pre-tax income, which grows tax-deferred until withdrawals are made in retirement.
   Contributions may be tax deductible, depending on income level.

3. Roth IRA: Another type of IRA, the Roth IRA allows individuals to contribute after-tax income, which grows tax-free and can be withdrawn tax-free in retirement.

4. 403(b): Similar to a 401(k), this retirement account is available to employees of non-profit organizations and public schools.
   Contributions are made with pre-tax income, and employers may offer matching contributions.

5. Thrift Savings Plan (TSP): This is a retirement savings plan available to federal employees, including military personnel.
   Contributions are made with pre-tax income, and the plan offers a variety of investment options.

6. SEP IRA: A Simplified Employee Pension IRA allows small business owners and self-employed individuals to contribute pre-tax income to a retirement account, with higher contribution limits than traditional IRAs.

7. Simple IRA: A Savings Incentive Match Plan for Employees IRA is a retirement savings plan designed for small businesses.
   Employers and employees can contribute to the account with pre-tax income.

It’s important to research and understand the different types of retirement accounts available to you and choose the one that best fits your financial goals and needs.

Personal Anecdote:

When I joined the Army at 19, I knew I wanted to start saving for retirement early on.

So, I signed up for the Thrift Savings Plan (TSP) offered by the Military.

Unfortunately, at the time, I didn’t have anyone to turn to for advice on how much to contribute or which investment options to choose.

Several years went by, and I had been regularly contributing to my TSP, but my returns were lackluster.

It turns out that my contributions had been invested solely in the G fund, which is 100% bonds.

If only I had had someone financial-savvy to talk to back then!

Eventually, I turned to a coworker for advice, and they recommended changing to C Fund which tracked the S&P 500.

This helped to increase my potential returns and I set up automatic contributions to my TSP, so I didn’t have to remember to contribute each paycheck.

It’s amazing how much those small contributions can add up over time!

Overall, my early experience with the TSP taught me the importance of seeking advice from those who have been there before, and not being afraid to make changes when necessary to reach your retirement goals.

Tip #2: Diversify Your Investments

Diversification is key to building a strong retirement portfolio.

This means investing in various asset classes, such as stocks, bonds, and real estate.

The goal is to reduce the overall risk of your portfolio by spreading your investments across different types of assets.

According to a study by Fidelity, investors with a diversified portfolio of stocks, bonds, and real estate earned an average annual return of 8.2% over the past 35 years.

When choosing investments for your retirement portfolio, it’s important to consider your risk tolerance, time horizon, and overall financial goals.

Tip #3: Avoid High Fees

Fees can eat away at your retirement savings over time, so it’s important to minimize them as much as possible.

They may seem small at first, but over time they can really eat away at your saving, that’s why it’s important to minimize them as much as possible.

To identify high-fee investments, look for funds with expense ratios above 1%.

You can also use online tools to compare fees for different funds and investment options.

One investment platform that I’ve found to be great for low-fee investments is M1 Finance.

They offer a variety of investment options with low expense ratios and no account fees.

Plus, if you sign up using my referral link, you can get a referral bonus as of writing this article (5/5/23 of $100).

When possible, choose low-cost index funds, which typically have lower fees than actively managed funds.

By minimizing your fees, you can keep more of your hard-earned money in your pocket and put it towards building a secure financial future.

Tip #4: Plan for Inflation

Inflation can erode the value of your retirement savings over time, so it’s important to plan for it.

This means investing in assets that can keep pace with inflation, such as stocks and real estate.

According to the Bureau of Labor Statistics, the average annual inflation rate in the US over the past 20 years has been 2.2%, but in recent times inflation has soared as high as 9.1% in June 2022.

In addition to choosing inflation-resistant investments, you can adjust your savings plan to account for inflation.

For example, you can adjust your savings contributions to keep up with inflation.

As the cost of living increases, you may need to save more each year to maintain your current lifestyle in retirement.

Another way to plan for inflation is to consider investing in inflation-protected securities, such as Treasury Inflation-Protected Securities (TIPS).

These securities are designed to keep pace with inflation by adjusting their principal value based on changes in the Consumer Price Index.

Tip #5: Don’t Touch Your Retirement Savings

Finally, one of the most important tips for saving for retirement is to avoid touching your retirement savings until you actually retire.

This means avoiding early withdrawals or loans from your retirement account, which can significantly impact your savings over time.

Think of your retirement savings as a cake that’s baking in the oven.

If you keep opening the oven door and poking at the cake, it’s not going to turn out as well as if you let it bake undisturbed.

In addition to the penalties and taxes associated with early withdrawals, taking money out of your retirement account can also limit the potential growth of your investments.

By leaving your retirement savings untouched, you give them more time to compound and grow over the years.

Conclusion

We covered five expert tips for saving for retirement, including setting a savings goal, maximizing contributions to retirement accounts, choosing investments with low fees, planning for inflation, and starting early.

Saving for retirement can be overwhelming, but it’s never too late (or early) to start.

By implementing the tips we discussed, you can start building a secure financial future for yourself and your loved ones.

Remember, the key to successful retirement savings is to start early, stay disciplined, and continuously refine your strategy as needed.

Whether you’re just starting out in your career or approaching retirement age, it’s important to prioritize your retirement savings and take advantage of the resources available to you.

At the end of the day, it’s never too late to take control of your finances and secure your financial future.

So, what are you waiting for? Start today at M1 Finance!

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– Investing On The Go