What Is The Best Way To Save For Retirement?

What is the best way to save for retirement? If an employer offers a defined contribution retirement plan with company match, it is a clearly for the long-term, the best price. When recieving a raise, put at least 1% of the raise into the retirement fund. Not everyone has access to a 401K plan, so s.

If a person is employed by a company that offers a retirement plan, a defined contribution retirement plan, which are typically referred to as 401Ks and that retirement plan provides any sort of matching of employee contributions. I would strongly encourage that person to begin to save by making contributions to the company retirement plan and benefiting both from long-term saving in a tax favored manner and the company match. Typically, a company may say for somebody who saves might match say half of what somebody saves up to 4% of compensation or up to 2% of compensation. So, if I put $4000 or $3000 in a year in a 401K plan and my company has a one for two match, they may put an additional $1500 over and above my $3000 in. Even though, it may only be able to start with a modest amount starting early and taking advantage of those matches is clearly for the long-term the best price.


Moreover, I would encourage somebody no matter how modestly they start. If they continue working for the same firm and they receive annual raises that they consider increasing their contribution by 1% of their annual raise. So, in other words if you get a 4% raise, increase your contribution to your retirement plan by 1%, so you end up with 3% that kind of process makes it less painful and helps to build a pool of assets, so it can be certainly valuable for retirement and even in emergency service or a short-term loan source.




The company typically will hire a financial services firm to administer the 401K, which is doing the bookkeeping on it and they will have a range of investments. For a 25-year-old as long as they plan on, once they have their so called rainy day fund of 3-6 months compensation or 3-6 months spending I guess I should say, then as long as they are planning on saving for the long-term, I would encourage them to have some more between two-thirds and four-fifths of the additional funds go into a inter-stock investments with remainder in the bonds.

There are many people, however, who do not have access to a 401K, whether they are working in a temporary assignments or they are working in a not permeable situation, then there are plans such as individual retirement accounts that can provide the same kind of benefit, although they would not have a match and if they are doing that there are a number of directly offered mutual fund firms, Vanguard being only one of them where they have what are called things like target retirement funds. So, you would simply say I am retiring a 25-year-old. So, they might pick a 2045 target retirement fund and then again they do not have to worry about what those dollars are invested in and the assets will be managed, so they get a little more conservative as the person gets older.

If someone is a little older, say 45, there would be two components on it. One is the need to save if you wish to have a subsidy unless they get retirement over and above social security is much greater because you have much less benefit of compounding. So, where you would want to be able to put away as much as 10% of your base compensation and the second component is you may wanted to be a little more conservative in your asset allocation. So, while you think about a 25-year-old being some more between two-thirds and four-fifths common stocks, the 45-year-old, who is just starting out saving for retirement might want to be in a half to three quarters stocks and the remainder bonds that will give you a little less return on average, but provide a little more stability, which is helpful if you got a shorter timeframe.

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