Saving for retirement is one of the most important financial responsibilities that a person has.  With social security benefits declining, and defined pension plans practically disappearing, younger workers will need to be able to finance the vast majority of their retirement on their own.  While saving enough money to live a couple decades without working may seem daunting, there are several tips that could be followed to help prepare for retirement. 

One tip that needs to be followed is to start saving as early as possible.  For those that are new to the workforce and earning smaller wages, saving for retirement may seem impossible and unnecessary considering they have so much time to prepare.  What most people do not take into consideration is that starting a very young age provides an investor with the ability to take advantage of compounding interest.  A $3,000 annual investment in your early 20’s will grow to over $50,000 in forty years, assuming a 7% annual return on your investment. 


Another tip for saving for retirement would be to increase your investment amount each year incrementally.  When starting to save for retirement, you may only be able to save a few percent of your salary.  However, each year you will likely receive raises, promotions, new job offers, or cash bonuses.  When you receive more unexpected money, it would be a good idea to save at least half of the extra cash that you have received.  Eventually, you will be able to save at least 15% of your salary, which should provide you with an ample amount of money by the time you reach retirement.


The third tip to follow to ensure that you save enough for retirement would be to constantly analyze your investment mix.  If you are investing in a 401k, you will likely have several different funds that you can invest in.  Each of these investment options will have a different strategy, with some focused on growth and others focused on receiving a fixed return.  When you are young, and have plenty of time until retirement, it would be wise to place a higher percentage of your investments in high yielding funds.  As you age, and approach retirement, more and more of your investments should be placed in low-risk funds, which offer a fixed rate of return.  This will eliminate the risk of losing a large portion of your nest egg when you are nearing retirement age.  



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