Retirement seems a long way away when you’re changing a diaper. Or getting three tiny people dressed for school. Or washing 7 loads of laundry in a row. But the thing about retirement is, the things you do earliest are the things that pay off the most. It’s true. Retirement isn’t the kind of thing you want to leave until the last minute to figure out. If you start now, you can actually be sure that your retirement will be pretty nice. If you don’t prepare, your retirement will be . . . ? So make the most of your opportunities now, just like you want your kids to. Make sure your retirement is one you can enjoy alongside your kids, once they’re grown.
- Start an Annuity. Annuities are pretty cool, and kind of underused at this point in history. They work simply. You put money away, which is left to grow in various ways. Then, when you’re ready to retire, it starts dripping back into your life to act as income when you are no longer working. If you save up enough, you can “hit the ground running” with your retirement, so to speak, making the transition from working to retirement a truly seamless process.
- Start an IRA. This is a great thing to start in your twenties (or your teens if you have the chance!) but a lot of people fail to do this simple step until their 30’s, 40’s, or not at all. That’s called leaving money on the table, and the reason is simple. An IRA keeps you from having to pay taxes on the money you save. There are maximums that you can save every year, but once in the account they are “tax-protected” one of two ways. The first, a Roth style IRA, you pay taxes when you make a deposit, but never again. This is great, because you’ll take out a lot more money than you put in. The Traditional IRA lets you save taxes till you withdraw, but that’s a worse deal for most people. The money can grow because you can invest it. With the power of compound interest, your yearly contributions can multiply many times if you start early enough.
- Buy a House. This is a toughy for a lot of people, but believe me it’s worth it. The reason is, home ownership is the main wealth building tool for most people in America. Because you get to keep the money you spend in mortgage payments in the form of equity, you don’t lose money like you do as a renter. Plus, homes tend to increase in value, usually 4-5% a year, so you could see a 25% return on your original investment in just 5 years, on top of all the money you’ve saved in equity. It’s really a no-lose deal if you buy the right house in the right area. Be careful about picking your house. If you can’t afford it, you could be locking yourself into hard times for a long time to come. But if you are able to do it beneath your means, you’ll be making one of the best financial decisions of your life. The wealth you build in equity will follow you well into your retirement if you’re careful.
Even just taking one or two simple steps can make a world of difference in your future and that of your retirement. What steps have you taken? Share your thoughts in the comments below!
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