Whether you’re 22 or 52, it is never too early or too late to start saving for retirement. The problem is that many people aren’t even sure where to start. While many people put money into their company’s 401(k) plans, this often isn’t enough. Factor in that an increasing number of workers are now independent contractors that don’t have 401(k) access and it’s more important than ever to know what your alternatives are.
Use an Insurance Plan as a Type of Savings Account
One of the easiest ways you can save for retirement is to bank on yourself. Banking on yourself, which is also sometimes referred to as the infinite banking concept or private family banking, occurs when you use a life insurance policy that can help you build your savings and eventually allow you to get the cash values out. A permanent life policy accrues a cash value over time. When you’re ready to use it for retirement, you can withdraw that cash value. Even better, it’s not subject to taxes unless you withdraw more than what you’ve paid in premiums.
Invest in Real Estate
If you have the means to do so, consider investing in real estate. One way to do this is with real estate investment trusts. REITs are typically accessible through a mutual fund and allow you to invest in real estate around the world. If you don’t have access to REITs, you can purchase real estate to rent to tenants as a means of bringing in extra income (depending on how much rent you can feasibly and ethically charge). Keep in mind that you’ll be responsible for upkeep on the home unless otherwise stated and agreed to in the lease. Are you wanting to save money but still invest? Consider a multi-family home. With a duplex, you can live on one side and rent the other side out to tenants as an extra income to put toward retirement.
Open an IRA Account
If you are an independent contractor without access to a 401(k), consider opening an individual retirement account. There are two main types of IRAs. Traditional IRAs allow you to open an account and contribute money to it for your retirement. The money you put into the account may be tax-deductible each year but you’ll pay income taxes when you withdraw from the account in retirement. Roth IRAs are a bit different. You cannot deduct the contributions you make on your taxes. However, when you withdraw from the account during retirement, you will not be taxed. You can talk to your bank to learn about the other advantages and disadvantages of each type of IRA to determine which one meets your needs.
Open a Traditional Savings Account
If you’re good at keeping money in your savings account, open one that is specifically for saving for retirement. Ideally, you’ll put 15% into the account from each paycheck. However, every little bit helps, so don’t be too worried if you need to contribute less. Even if you put in only $20 per paycheck and get paid twice a month, that’s $360 a year. Factor in that many savings accounts accrue interest and you’re looking at a large sum when you enter retirement age.
Save Extra Money You Come Across
Did you get a big holiday bonus from your job? Perhaps your family gave you money as an anniversary, holiday, or birthday present. Maybe you bought a lottery ticket on a whim and won some money. Regardless of how you come across extra money, consider saving at least half of it if not all of it. This way, you’ll have a nice nest egg started when you decide to retire.
The biggest thing to remember when trying to save for retirement is that it won’t all happen at once and you don’t always need to save huge amounts of money every month. Even a few bucks here and there will add up over time. Don’t fail to save based on the idea that you don’t have “enough” to do so. Every bit helps.