Early retirement planning has become more of an issue today with the economic recession biting hard. Real estate values have been decimated and the value of that home you thought would provide a lot of the capital during retirement has been eroded away significantly.
It doesn’t matter where you live in the world one thought which consumes many of us is how will we survive during our retirement years?
These thoughts certainly start to play on the minds of those in their forties and beyond and for very good reason.
If you are heading towards the 50 milestone it’s not too late to get an early retirement planning strategy in place. A 401(k) is a great place to start. One of the advantages with this type of saving is it allows you to defer taxes on money you save for retirement until you actually make a withdrawal.
Be warned though, unless you invest the money wisely, your 401K can become more of a nightmare than a positive aspect of your retirement. How? Well, if the money isn’t there at retiring age, what was the point of putting money away on a regular basis. You might as well have spent it when you earned it!
Start Now
Certainly starting your 401K would have been great when you first entered the workforce but don’t despair, if you are in your forties or fifties. It’s still not too late.
Try to match what your employer is contributing towards your fund. Many at a much younger age are happy to just go with what the employer submits and this is okay but realize you can significantly boost your end result by upping the ante on your end.
Another tip for giving your 401K the best possible chance of reaping a good harvest when it matures is to diversify you’re portfolio. Don’t put all your eggs in the one basket.
By this, avoid concentrating on one industry or one company. Take a look at some of the major companies who have disappeared in the last 20 years through bad or mis-management. Become prudent in managing your funds and remember, diversifying is the key.
Leave It Alone
Rules differ from country to country regarding 401K’s and superannuation plans but the one rule everyone should adhere to is leave it alone. Circumstances such as a dire emergency within your life may mean this is unavoidable but in the main, leave it alone.
Early withdrawals are often riddled with penalties which can be costly. In some cases, early withdrawal penalties can reach 50% of the fund amount. Simply not worth it. Keep thinking about the healthy benefit you can look forward to at maturity.
Remember, if you think you’re too late to get your 401K going think again. A word to your financial expert can put you on the right track and is highly recommended. Early retirement planning can start right now.