Are you focusing on financial independence?
When it comes to bettering ourselves and our future, most of us tend to focus on fitness, introducing good practices, personal goals, and our health. While planning out ways to improve our life, we should always remember to include one important factor: financial independence.
The most important step is to start
There are many options when it comes to investing your money. It can be overwhelming trying to decide what will help you reach your goals. But the truth is- the best plan is to just start. You can start by contributing to your tax-advantaged, employer offered retirement savings account. Your employer may even offer a match program that provides additional savings growth.
Update your plan as your goals change
The earlier you start, the more time your contributed funds have to compound and grow. Once you’ve started, you can continue to customize your strategy based on your goals and stage in life. This could mean investing in multiple options to maximize your savings. In addition, you can add new investment options and accounts to help you navigate your short and long-term goals. Although retirement plans generally have restrictions that require you to leave contributions in the plan until retirement, there are exceptions. In case of extraordinary circumstances, some retirement plans allow loans and early distributions for hardship. This means you can save for retirement and, if necessary, use your retirement savings account to pay for college tuition, mortgage payments, or medical expenses. But be careful, some types of early distributions may result in tax penalties.
Create a roadmap based on your stage in life
There are several strategies you can take based on where you are in your wage-earning years. Whether you are starting your first job, planning to start a family, already an empty nester or just a few years away from retiring-there is a financial solution to help you become financially independent.
The younger you are when you start your journey, the more flexibility you have with your savings. For example, you may assume more risk through the investment options you choose such as stocks, bonds and mutual funds. These types of accounts are based on market performance, so they have the capability of providing elevated potential growth in your savings but are also subject to elevated potential losses. It’s important that the younger generation gets an early start on saving for retirement.
If you start your investment journey later in life, then you might not be willing to assume that much risk. However, there are options available that offer less risk with locked-in interest rates, allowing you to safeguard your original investment regardless of the market’s ups and downs.
To better understand how much, you should save for retirement, use this retirement calculator tool.
This blog is up to date as of December 2021 and has not been updated for changes in the law, administration or current events.