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I’ve been getting emails filled with concern about retirement accounts. With all the economic trouble happening — especially with regard to the stock market — it is no surprise that many are concerned about whether or not their nest eggs will be there in the future. While there is cause for concern for the short-term and those nearing retirement right now, for the long term, there is a better chance that you will see a recovery of the economy, the financial markets and your retirement account. Even if you can hold out for a few extra years, you might find things improved.
If you are just starting out, though, there are some things you can do to help your retirement account grow better. Here are the top 5 tips for your retirement account:
- Start investing in a retirement account early. It’s never too early to open a retirement account. Teenagers can have a Roth IRA and get in the habit. Even if you’re older, the best time to open a retirement account and start preparing for the future is now.
- Use tax advantaged retirement accounts. There are tax deferred and tax free retirement accounts set up especially to encourage retirement saving. (Jim at Bargaineering has a great post about retirement investing.) Take full advantage of the tax benefits that can come with retirement accounts. If you can set them up for your spouse as well.
- Avoid early retirement account withdrawals.There are a few exceptions, but in most cases, you will be hit with penalties and taxes when you withdraw early from a retirement account. Not to mention that your capital will be reduced, so you won’t be earning as much.
- If you can, avoid leaving your employer until your employer match earnings are vested. In this economy, that can be hard to do. But with most employer match programs, the money they put in isn’t actually yours until after a certain amount of time. You want to make sure you are vested before you change jobs if at all possible.
- Invest in your retirement account regularly. Have your retirement account money taken out of your paycheck directly. We have automatic withdrawal every month from our checking account (I’m self-employed). Regular investing in your retirement account is key to helping it grow. Even in times like these. As long as you have fundamentally sound investments, and your account is sufficiently diversified, now can actually be a good time to invest in your retirement account. You’re getting great bargains that are likely to yield great results down the road.
Do you have any other tips for your retirement account?
image credit: sxc.hu
Disclaimer: I am not a financial professional. Any information you get from this site is not intended as advice. It is likely to be incomplete, and it may not apply to your individual circumstance. Do your own research, consider your situation and/or consult a professional before making money decisions.
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Are people over reacting? ,
1051 days ago
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Great observation, Manshu! The earlier you start, the less risk you have in the long run.
I too think that investing early and regularly is more important than anything else. If you start off early it gives you plenty of time to see a few recessions and booms and hone your investing skills along the way too.
Great thoughts, Jean! I like the idea of not getting used to raises and promotions so that you can use them as “extra” rather than spending them.
There is no way to overcome the past, so get started now. I have been putting the max into my company retirement fund for years. It’s amazing how quickly the money adds up when you “pay yourself first.” I also put all raises/promotions into savings/IRAs, so I wouldn’t get used to living on them.
You make a good point. The earlier the better. And even if all you do is put in $10 a week, you’re off to a good start.
Investing early is really key and something I hope my kids will do as well when they start a career. My kids are to young now, but I hope they will appreciate that we started a 529 plan when they were born. I tell my friends to open one and they all just say that they have bills to pay and can’t do it right now.