Ladenburg Thalmann Asset Management CEO Phil Blancato shares his advice on how to save for the golden years.
Retirement can be a daunting prospect. When you are used to receiving a constant paycheck, the thought of losing it and depending on savings and Social Security can be overwhelming.
The good news? A few simple moves on your part can set the stage for the retirement you’ve always envisioned – a retirement that is rewarding and free from financial stress. Here’s how to do that.
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1. Save from an early age
Giving your savings time to grow is the best thing you can do for your retirement. Imagine you start earning $ 300 a month at age 22, right when you first enter the job market. If you invest that money with an average annual return of 7% (more on that in a minute), you will end up with just over $ 1 million when you reach 67. Just wait five years to start saving, however, and you will end up with $ 719,000. This is still impressive, but it is a lot less money to live.
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2. Save aggressively
The 7% return we just used in our example? This assumes an IRA or 401 (k) that is invested heavily in stocks. If you play it safe with your investments, you may end up with a much lower return that will limit the growth of your savings. If you were investing heavily in bonds in your retirement plan, you could enjoy an average annual return of 4% on your investments. And in that case, you’ll end up with just $ 436,000 instead of over $ 1 million, assuming the same $ 300 monthly contribution and 45-year savings window.
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3. Run out of debt
Accumulating debt can destroy your retirement, even if you accumulate that debt years before the end of your career. First, the more debt you accumulate, the more money you throw away paying interest and the less money you have the option to save. In addition, if you accumulate debt until retirement, it will be one more monthly expense that you will need to pay, hampering your Social Security benefits and withdrawals from retirement plans. A better bet is to avoid harmful debt and stick to the good type, like mortgage debt or a car loan as needed.
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4. Increase your Social Security benefits
While you should make every effort to save a good amount of money to supplement your Social Security benefits, you still want these payments to be as generous as possible. And a guaranteed way to get more Social Security money is to simply delay your benefits beyond the full retirement age, which is when you are entitled to your full monthly benefit based on your salary history. For each year that you postpone the order beyond that point, your benefits increase by 8%, up to the age of 70. Wait long enough and you could end up earning thousands of dollars in extra benefits each year.
Perhaps your dream retirement will involve exotic vacations and fine dining. Or perhaps it means staying in the home where you raised your children and enjoying local activities and pastimes. No matter what your vision, these simple moves can be your ticket to meeting the goals you have set for yourself.