THE START LINE
Sign up for your employer’s retirement plan
The
first step in your journey is signing up for a 401(k) or equivalent,
if your employer offers one. Many employers’ match your contributions.
If your employer doesn’t offer a retirement plan, look at your options
and see if an IRA is right for you.
THE FIRST HILL
Forgetting to roll over a previous 401(k)
When you
leave your funds behind at your previous job, they sit there waiting,
unattended. Roll those dollars into a new plan with your new employer
or into an IRA that will help you keep your funds working for you.
THE WATER STATION
Start an emergency savings account
Try saving a few
hundred dollars a month to help build a financial cushion in case you
lose your job or for unforeseen medical expenses. Having three months’
worth of expenses is a good benchmark.
THE SHARP TURN
Taking a loan from your retirement funds
Sometimes
your only option is to borrow from your 401(k). While any interest you
pay on the loan goes back to your retirement savings, failing to make
payments or leaving your job prior to paying off the loan could result
in being penalized. These loans offer little or no flexibility in
changing payment terms and often offer a max of five years to pay back
what you borrowed!
THE ENERGY SNACK
Purchase an investment property
A rental property
can become a great source of retirement income. First-time landlords
should focus on a single-family home or apartment to see if it’s a
good fit. You can also make extra cash if you’re able to do small
repairs and maintenance to the property yourself.
THE DEHYDRATION
Penalty for a 401(k) withdrawal
Withdrawing money
from your 401(k) before the age of 59 and a half without a plan to
return it will result in a penalty. The penalty is of 10% of the
amount withdrawn as well as paying regular income tax on that amount.
THE BANANA STOP
Pay off your mortgage or student loans
Paying off a
big debt, like a mortgage or student loan, frees up a big portion of
your income that can then be used for other investments and savings.
THE ADRENALINE RUSH
Pay off your credit cards
High-rate debt—anything
above 9% interest—is considered toxic debt. Paying off this debt
before you retire is key to stretching your retirement dollars.
THE LAST HILL
Natural disasters and other life events
Unexpected
life events, such as a natural disaster, death in the family or
divorce, can throw off your retirement plan. In some cases, it’s best
to reach out to a professional, like a lawyer, and having the extra
protection of an insurance plan helps too.
