Many of us have the opportunity to save for our retirement through an employer-sponsored retirement plan like a 401(k), 403(b), or 457 plan. If you receive a pay increase this year, that would be an excellent time to consider upping the amount you contribute.
Most people find it easier to make retirement contributions by budgeting something right off the top of each paycheck. If you have access to a retirement savings plan at work, instruct your employer to withhold enough through paycheck deferrals to contribute the maximum limit each year. If you are self-employed, do the same with automatic deposits into a SEP IRA, profit-sharing plan, or independent 401(k) plan.
If you do not believe you can contribute the maximum at this time, consider increasing the amount you contribute each time your income increases until you reach the maximum permitted by law. The earlier you start, the better the results. Compound investment returns over time have been called the eighth wonder of the world.
Remember, most people who are financially independent got there by contributing handsomely toward their retirement. They are not contributing handsomely to their retirement because they are financially independent. Of course, you can only save the amount you can realistically afford. You must keep some money in an emergency reserve account that is available for the unexpected.
Remember to focus on what you can control. We cannot control the markets or the economy. But we can control how much we invest out of each paycheck. Don’t fret what you cannot control. Focus on what you can control.
Take responsibility for your financial independence.
For more insight, listen to Jentner Wealth Management’s weekly podcast by clicking here. Or download Jentner’s white papers on The Four Cornerstones of Prudent Investing and The Active Versus Passive Investing Debate.