- Save As Much As You Can As Early As You Can.
Though it's never too late to start, the sooner you begin saving, the more
time your money has to grow. Gains each year build on the prior year's --
that's the power of compounding, and the best way to accumulate wealth.
- Set Realistic Goals.
Project your retirement expenses based on your needs, not rules of thumb.
Be honest about how you want to live in retirement and how much it will
cost. Then calculate how much you must save to supplement Social Security
and other sources of retirement income.
- A 401(k) Is One Of The Easiest And Best Ways
To Save For Retirement.
Contributing money to a 401(k) gives you an immediate tax deduction,
tax-deferred growth on your savings, and -- usually -- a matching
contribution from your company.
- An IRA Can Also Give Your Savings A
Tax-Advantaged Boost.
Like a 401(k), IRAs offer huge tax breaks. There are two types: a
traditional IRA offers tax-deferred growth, meaning you pay taxes on your
investment gains only when you make withdrawals, and, if you qualify, your
contributions may be deductible; a Roth IRA, by contrast, doesn't allow
for deductible contributions but offers tax-free growth, meaning you owe
no tax when you make withdrawals, but contributions are not deductible.
- Focus On Your Asset Allocation More Than On
Individual Picks.
How you divide your portfolio between stocks and bonds will have a big
impact on your long-term returns.
- Stocks Are Best For Long-Term Growth.
Stocks have the best chance of achieving high returns over long periods. A
healthy dose will help ensure that your savings grows faster than
inflation, increasing the purchasing power of your nest egg.
- Don't Move Too Heavily Into Bonds, Even In
Retirement.
Many retirees stash most of their portfolio in bonds for the income.
Unfortunately, over 10 to 15 years, inflation easily can erode the
purchasing power of bonds' interest payments.
- Making Tax-Efficient Withdrawals Can Stretch
The Life Of Your Nest Egg.
Once you're retired, your assets can last several more years if you draw
on money from taxable accounts first and let tax-advantaged accounts
compound for as long as possible.
- Working Part-Time In Retirement Can Help In
More Ways Than One.
Working keeps you socially engaged and reduces the amount of your nest egg
you must withdraw annually once you retire.
- There Are Other Creative Ways To Get More
Mileage Out Of Retirement Assets.
You might consider relocating to an area with lower living expenses, or
transforming the equity in your home into income by taking out a reverse
mortgage.
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