Pretty much any retirement advice boils down to one line: The earlier you start, the better. As reported by The New York Times, people who start saving for retirement at age 22 end up with nearly $560,000 more than those who started saving at 32. If you’re closer to the latter number, it’s easy to get the impression you missed the call, however, the truth is that the ship never leaves port—not really. Of course, financial advice in general is an incalculably broad topic, but there are a few tips and tricks you can deploy at any time to get started on a solid nest egg. Read on to learn from financial experts what the best budget hacks are that’ll set you up for retirement.
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Look into catch-up contributions.
For most of your career, there are limits on how much you can put into a retirement account like a 401(k). It’s wise to max out the amount of your paycheck that goes into this fund. You should also make use of your employer’s contribution matching program, provided they offer such a benefit (it’s a common perk at mid-sized for-profit firms these days). But the big one comes when you hit 50: catch-up contributions.
Financial services company Western&Southern Financial Group explains that catch-up contributions basically lift the ceiling on how much you can contribute to a retirement fund. For instance, this year, the Internal Revenue Service (IRS) allows individuals to contribute up to $20,500 to a 401(k), up from $19,500 for the prior year. But if you’re over 50, you can add an additional $6,500 to that, bringing the total annual tally to $27,000.
Delay your social security.
Once you turn 62, you can start to see the years of Social Security deductions from your paycheck payoff. But if you can hold off a few years, thanks to a program called Delayed Retirement Credits, you’ll earn even more. The exact rate is dependent on the year you were born (the Social Security Administration has a handy chart that can help you calculate) but in general, it earns you more in the long term.
“For every year you can delay receiving a Social Security payment before you reach age 70, you can increase the amount you receive in the future,” Debra Greenberg, director of Bank of America’s retirement and personal wealth solutions department, told Merrill Edge.
Get a financial advisor.
One of the single best things you can do to prepare for retirement is to get a really solid financial advisor in your Rolodex. Finding a trusty one isn’t as easy as walking into your local Bank of America and talking to the first person you run into, though.
There are several professional organizations that maintain thorough databases of financial planners, including the XY Planning Network, the Garrett Network, and, of course, the National Association of Personal Financial Advisors (NAPFA).
Forbes reports financial advisors aren’t cheap, ranging from around $250 per hour to more than $5,000 if you’re looking to keep one on retainer. There are those, too, who operate on fees, essentially skimming a percentage off any extra earnings your assets earn; NAPFA and the Garrett Network, for what it’s worth, only list advisors who operate off a fee. Above all, your intent should be to find someone who’s a fiduciary—meaning they’re effectively duty-bound to act with your best interests, rather than their own potential profit, in mind.
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Consolidate your accounts.
Your first employer opened your retirement account with Fidelity. Your second, TD Ameritrade. Your third, Wells Fargo. Soon enough, you’re fielding what feels like a weekly deluge of envelopes with details about retirement accounts at a slew of banks, all for the high crime of trying to build out your résumé. The easiest way to make it stop is to consolidate your accounts into one—a move that, as a bonus, has a financial incentive too.
“People can end up with smaller IRAs and old 401(k)s and so forth,” Christine Benz, director of personal finance at Morningstar, a personal finance research firm, told CNBC. Not only is this annoying, but CNBC reports employers can just cash out small accounts (typically under $1,000) and send you a check, effectively removing that money from your retirement fund. There’s also the matter that withdrawing requires a fee; the more accounts you have, the more fees you have to pay. And this is to say nothing of just how head-spinning the process of tracking it all can be.
Yes, consolidating all of your disparate accounts can be a pain in the neck. You could do it yourself by calling up every individual bank. An alternative method is to just tap that financial advisor. You’re basically paying to keep the earnings you already have, but money can’t buy more time.