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How to Save for Retirement

Posted by in Money Saving Tips
17
Mar 2014

Saving For RetirementSince people have longer life expectancies today than they did in the past, it’s important for families to think about how they will prepare for two or three decades of retirement. These five strategies should help you make the most of your money so you can spend your retirement years enjoying life.

#1: Start Saving Now

It doesn’t matter how old you are. Today is the right day to start saving for retirement. Earlier is always better, but you can’t change the past.

The earlier you start saving for retirement, the longer your money has to grow. That might sound obvious, but it’s a crucial part of having enough money to live well during retirement. Money that you save now will start earning interest. As your money grows, you will get bigger returns from the interest rate.

#2: Lower Your Debt

Debt can make it nearly impossible to save for retirement. Just like a savings account, debts grow. Unfortunately, debt has a higher interest rate. That means your debts are constantly growing faster than your savings.

If you have high interest debt, such as credit card debt, focus on eliminating it before you start saving for retirement. Getting the debt out of your life will make it easier for you to save more.

#3: Use Retirement Plans

If your employer offers to match a certain portion of your retirement savings, take advantage of that benefit. That’s free money for you. If you don’t take it, you’re essentially getting paid less than those who do take it.

#4: Use Investments With Low Fees

When you invest money in a private retirement fund, you have to pay someone for their work. Depending on the investment company, you might pay the person a flat rate or that person might get a percentage of your earnings.

The less you pay that person, the more money you can devote to your investments. That doesn’t necessarily mean that you should always choose the cheapest option. The cheapest investor might have low prices because he or she is less experienced. You should, however, look for investment managers who charge fair fees.

#5: Diversify Your Investments

You never know what will happen to your investments. They could excel one day and lose half their value tomorrow.

Diversifying your investments helps you avoid that risk. When you invest money in different market sectors and businesses, you protect yourself from loss. Assuming that the whole market doesn’t fall, you’re safer with diversified investments.

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