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Got a Retirement Plan? Time is on your side

Got a Retirement Plan? Time is on your side

But, maybe it’s time to start thinking of being financially awesome as the reward itself. Here’s a sobering statistic: according to the National Institute on Retirement Security, 66.2 percent of working millennials have nothing saved for retirement. If you count yourself among them, or aren’t satisfied with your progress, there’s time for a turnaround.

Finding your magic numbers

Much has been written about how much money you should save to ensure a comfortable retirement, but not everyone has the same magic number. For some, comfort may mean downsizing a home and puttering in a garden all day, while others may define it as regular golf games and luxury trips abroad.

Additionally, you may want to retire early, in your 50s, or you may not want to give up the structure and purpose of your job until you absolutely can’t work. The longer you plan to be in retirement, the more you’ll need to set aside.

Everyone has their own vision of retirement, which is why we should all do some soul searching when embarking on a savings plan. The important thing is to start saving and investing early to give a nest egg time to grow.

Capitalize on tax-advantaged plans

If you’re eligible to participate in a workplace retirement plan, such as a 401(k), this is one of the easiest ways to save. Contributions are made with pre-tax dollars, reducing your income tax bill, making saving automatic and removing the temptation to spend cash you don’t see.

To encourage saving, some employers match contributions up to a certain percentage. If you don’t participate, you’re leaving that money on the table. Check your employer’s vesting schedule, as you may be required to stick around for several years to claim 100 percent of their contributions. Otherwise, if you change jobs, you can roll over the assets to a new employer’s plan or an individual retirement account (IRA).

You can fund a traditional or Roth IRA anytime with earned income. A traditional IRA is tax-deferred, meaning you take a deduction now and pay taxes upon withdrawal. With a Roth IRA, you put in after-tax dollars, but the earnings are withdrawn tax-free. Both IRA options have contribution limits that phase out based on earnings, so younger workers still in a lower income range can take advantage of seeding an account and then watching it grow over time. To get in the habit of making regular contributions, consider establishing automatic investments.

Allocate for your timeline and risk tolerance

The Great Recession lingers in the minds of many, meaning some may be risk averse when it comes to investing retirement dollars. Generally, the more time you have until funds are needed, the more risk you can assume in your portfolio because there is ample time for a recovery.

If significant stock exposure will be a constant worry, then their growth potential relative to less volatile and more conservative bonds may not be worthwhile for you. You should be comfortable with your investments while allowing for some growth of assets.

If trying to allocate and rebalance assets is simply more than you want to manage, think about target date funds. These are portfolios that are managed with your retirement date in mind, leaning toward more stocks the further away you are and gradually shifting to more bonds the closer you get to protect the growth you’ve achieved.