Most people realize at some point that the younger they are when they start saving for retirement, the more money they’ll have when they’re actually ready to leave the rat race. This is due to both the money you put in and the interest you earn (depending on the type of account you choose, this could be significant).
Unfortunately, many people don’t reach this conclusion until later in life, when it’s a little too late to capitalize on the money they could have earned from years of compound interest. But there are ways that you can catch up and get a little money socked away before the age of retirement, even if you’re late to the game. Here are a few to try.
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Up your contribution.
If you’re already contributing to a 401K, see if you can donate more from each check to your account. And if your company offers a matching plan, go up to the maximum percentage that they’re willing to match funds on. Every little bit helps when it comes to your retirement savings and a 401K offers one of the best deals around because the money you contribute is considered pre-taxable income.
Start a Roth IRA.
You’ll get the most out of this compound interest account by starting to contribute early in life; in fact, a person who contributes between the ages of 25 and 35 will end up with roughly the same amount of money as a person that starts contributing at 35 and makes deposits for twice as long.
Ouch. But that doesn’t mean you can’t still get some benefit out of this pre-tax savings account (you’ll see the savings on your taxes), especially if you are able to let it sit for a while even after you retire. So get an IRA.
Play the market.
One of the quickest ways to make money is by playing the stock market, but there’s always the possibility that you can lose your shirt, as well. However, you can find ways to invest safely, maximize potential profits, and cut back on fees. (Analyze market risks like this.)
You’ll need to start by finding a firm and a broker that you trust to offer advice on investment strategies and provide stock tips. But you can’t let your broker do everything. You need to manage your own money by being informed, creating a diverse portfolio, and asking for proof of earnings (you don’t want to have a Madoff moment).
Invest in property.
No investment is a sure bet, but you can’t get much closer than by purchasing property. You do need to be careful about what you purchase, though. You’ll have to consider location, age, size, amenities, cost, and so on, but those are all things your real estate agent can help you with.
As long as you take your time and invest wisely, a house will prove to be an asset that can deliver a significant return when you retire.
You’ve been working hard your whole life and you could probably use a break, but that doesn’t necessarily mean you’re ready to start looking at California retirement communities or Montreal nursing homes. In fact, you may find all the free time a little boring.
And if you don’t have the extra money to travel and enjoy life, what are you going to do? You can certainly continue to earn if that is your desire, and when you’re ready to stop you’ll have that much more saved for retirement.