(ARA) – The thought of retirement conjures up images of exciting travels, more attention paid to neglected or new hobbies, and spending more time with family and friends. But before a person reaches this time in life, it is important to build a solid, fruitful retirement savings plan before he or she says goodbye to work life.
Joyce Hall-Yates, paralegal instructor at Brown Mackie College-Findlay in Ohio, says that it is never too late to focus on constructing a personal retirement savings plan. ‘I believe that most employees do not take advantage of retirement plans to the greatest extent possible,’ she says. ‘Often, retirement years seem so far distant that the need for these funds are not looming. Young people tend to pay imminent bills. But even if a person begins to commit to $50 a paycheck, the payoff at retirement can be large.’
At the end of each year, every employee should review his or her financial situation, to see how much more he or she can deduct into retirement savings. ‘There is a perception that most people think investing in the market is complicated,’ says Hall-Yates. ‘Investing assets is not difficult, as long as a person has time to overcome the ups and downs of the investment market. Employers’ 401K plans usually allow an employee to make choices for his funds to be invested into different stock or bond mutual funds.’
According to Hall-Yates, most employees should follow a simple rule: If an employee is younger than 50 years old, he should have a higher percentage of his retirement funds in a stock-based mutual fund. Starting at age 50, the employee should move a small percentage of his retirement funds into bond funds, until at the age of retirement he has a larger portion in bond funds than in stock funds.
What should a fresh-out-of-college professional be doing today to start planning for a healthy retirement savings? A young new professional needs to immediately create a program to build retirement assets. To create a program that is simple to follow, a person must understand the time value of money and use this concept to create his/her own wealth.
‘The most important, immediate step that a young professional needs to take is to create an automatic retirement savings plan. Young professionals should sign up for payroll deductions into the company’s 401K plan,’ says Hall-Yates. Most companies will match a certain percentage of an employee’s 401K savings. A professional should deposit a percentage from salary that takes advantage of any employer match.
Here are personal finance milestones from Hall-Yates that a person should consider in building up a successful retirement savings:
Courtesy of ARA Content
This post was last modified on 02/03/2015 11:26 am