Finance
3 Retirement Saving Mistakes Millennials Should Avoid
Global Banking & Finance Review®
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When it comes to personal finances, most millennials are focused on affording groceries, making monthly rent or mortgage payments, and managing other expenses and bills, not to mention paying back
When it comes to personal finances, most millennials are focused on affording groceries, making monthly rent or mortgage payments, and managing other expenses and bills, not to mention paying back student loans and other forms of debt. While these are all important ways to allocate your income, it’s also vital that you make saving for retirement a priority. Keep reading to learn how to avoid three common retirement savings mistakes so you can continue to support yourself financially and make the most of your future.
Aging is a part of life, and while it may feel strange to visualize your older, retired self, doing so can help you consider retirement planning with that person in mind. The steps you take today to get your finances in order can be the difference between having to work until you’re 80 or being able to spend your golden years caring for grandchildren and participating in your favorite hobbies.
As you think about your goals and priorities for the future, consider how each type of financial account plays into the larger plan, including life insurance. Depending on the policy you choose, life insurance can safeguard your plans by giving loved ones a way to replace income, pay down the mortgage, or meet other financial needs if the unthinkable happens to you. A term life policy is an affordable option that offers protection for a set period, often between 10 and 30 years.
It’s important to make the most of your youth and enjoy your hard-earned money through hobbies, travel, and other activities that bring you joy, but you also want to be smart about your overall financial health. Get in the habit of taking a close look at what you earn, your non-negotiable monthly expenses (utility bills and commuting costs, for example), and how much you have left over.
Making a weekly or monthly budget can help you get in the habit of putting aside money for a rainy day and avoiding overspending. Plus, the money you save now can collect interest and grow over time if it’s placed into the proper interest-bearing or investment accounts. The popular 50-30-20 method recommends you spend 50% of your post-tax income on needs, 30% on wants, and 20% on savings. You could further break down the savings percentage into money you add to your personal savings account and funds you contribute to a 401(k) or Individual Retirement Account.
Contributing to a 401(k) or opening an Individual Retirement Account (IRA) is a great way to put your income to work. These retirement accounts provide a tax-advantaged way for you to invest money you agree to leave in the account until age 59 ½. If your employer offers a matching contribution to a 401(k), be sure to take advantage so you’re not leaving free money on the table.
Any money you put into a retirement savings plan has the potential to grow through interest and dividends until you withdraw it. An IRA plan works much the same way as a 401(k) and can be a great alternative if you are self-employed or your employer doesn’t offer a retirement plan. You can also contribute to both a 401(k) and an IRA to maximize your retirement investments.
Remember, it’s never too early or too late to start saving. Putting away what you can for retirement now is better than saving nothing at all. Your future self will thank you.
The primary purpose of permanent life insurance is to provide a death benefit. Using permanent life insurance accumulated value to supplement retirement income will reduce the death benefit and may affect other aspects of the policy.
Retirement planning is the process of determining retirement income goals and the actions necessary to achieve those goals, including savings, investments, and insurance.
A 401(k) is a tax-advantaged retirement savings plan offered by employers that allows employees to save and invest a portion of their paycheck before taxes are taken out.
An IRA is a type of savings account that is designed to help individuals save for retirement with tax advantages.
Life insurance is a contract that pays a designated beneficiary a sum of money upon the insured's death, providing financial protection to loved ones.
Budgeting is the process of creating a plan to manage income and expenses, helping individuals allocate funds effectively to meet financial goals.
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