1. Adopt a savings mindset.
Look at putting retirement money away as paying yourself first. Decide how much
to contribute each paycheck, and then have your employer direct deposit the
amount into your retirement account. Experts suggest 8% to 10% of your income.
Come up with the number by making a budget for all your expenses and other
savings, and then deduct this from your net income.
2.
Sign up
for your employer's 401(k) or 403(b) plan. Contributions
are tax-free to certain limits. Employers often match your contribution, so put
in enough to qualify. Seek professional advice in choosing investment
options.
3.
Set up an Individual Retirement Account (IRA).
If your employer doesn't have a 401(k) or 403(b) plan, open an IRA or a Roth
IRA, or a SEP IRA if you're self-employed. There are different requirements and
limits for how much you can contribute tax-free. Consult a tax professional
for details about any investments with tax implications.
4.
Take
advantage of bigger benefits as you get older. Once you
reach 50, federal regulations let you contribute more into tax-advantaged
retirement accounts to let you "catch up." Seek professional advice
on this, but most experts recommend putting in the maximum allowed.
5. Start an
emergency fund. This is for emergency expenses, such as major home
or vehicle repairs, or to help pay the bills between jobs. You don't want to
touch your retirement account because you could lose tax benefits or pay
withdrawal penalties. Try to set aside 3 to 6 months of living expenses.
6. Save as much as you can. In addition to retirement and emergency accounts,
cut expenses where you can and put money into a savings account you can draw on
when you're no longer working.
7. Pay off credit card debt. Set up a pay-off plan now, so you won't have to
use your retirement money. Once it's paid off, keep making those payments –
into your savings account!
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