It’s common knowledge that the best time to start investing is as soon as you enter the workforce – even earlier if your family could afford it. This gives investments the opportunity to grow and pay dividends during retirement. Unfortunately, many people aren’t following this advice, waiting later in life to invest.
A 2014 survey has noted that about a quarter of those between the age of 50 and 64 have not started their retirement funds. To further showcase how dire the situation is, about 28 percent of Americans have less than $1000 in their savings that they could utilize for retirement.
The best time to invest is now. The sooner you get started diversifying investments and saving for retirement, the better. Here’s how to play catch-up.
1. Maximize Employer Retirement Plans
Maximize contributions to employer-based retirement accounts. Between 2015 and 2017, the 401(k)-annual limit for contributions is $18,000. For those who are older than 50, you are allotted an additional $6000 to catch up. Create a budget that considers income from salaries and other investment opportunities, while considering expenditures. Careful planning can substantially boost your savings account.
2. Wealth Accumulation Supersedes Everything Else
Make wealth accumulation a top priority when investing in your formative years. Those who are younger can be laissez-faire when it comes to savings. Simply put: you do not have this luxury. Every time you get a raise or an additional stream of income, save it after you’ve rewarded yourself. Use the additional revenue to pay off any debt or to further contribute to your 401(k). Make it a habit of providing the maximum for tax-deferred accounts.
3. No Time for Nonsensical Financial Risks
This isn’t the time to take risks with your financial identity. Using your retirement savings to invest in volatile trade options is not a viable choice, and it’s a quick way to throw away the money that you’ve saved. Recognize and respect your financial limitations.
Viable Investing Opportunities Later in Life
Make the income from a second job or a new retirement venture work for you. You can use a tax-advantaged retirement account to place the money from a second job, allowing you to compound the money that you save. For example, if you have a freelancing job that makes you an additional $4,000 a year, you can put that money in an IRA savings plan.
Funds in your retirement plans do not need to be stagnant – they can be used with low-cost bond funds. Many of these low-cost bond funds include Vanguard, Dodge & Cox, and Fidelity Intermediate Muni Income – they are investing opportunities with a low chance of principal loss. Vanguard 500, in particular, is a viable, passively-run fund with easy accessibility for those who may not have the deepest retirement funds.
Retirement planning and wealth accumulation can be a bit more difficult in your formative years, but it isn’t impossible. Commit to adopting strategies that will allow you to save more money and begin to take actionable steps right now rather than later.