Planning for retirement, though sometimes stressful, is one of the most vital actions you can take to ensure your post-retirement future is as bright as your current lifestyle.
Still, many people don't feel positive about the outlook -- 62 percent of people surveyed said they are less confident about retirement since the recession began, according to a June survey from the Transamerica Center for Retirement Studies. The survey also found that 57 percent of workers plan to work past age 65.
To ensure you don't end up in a situation where you haven't saved enough for retirement, consider these five factors the next time you sit down to adjust your plan.
1. Time is more important than money.
When it comes to retirement savings, the golden rule is to save as much as you can as early as possible. The sooner you begin saving, the more your money has a chance to grow. Starting early allows you to take advantage of compound earnings, which is the idea of making money on your money. If you're late to the savings game, wait to start Social Security -- each year you hold off receiving your benefit up to age 70, your monthly check increases.
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2. Set realistic goals.
While it's easy to brush off retirement savings because of what you think are more important monthly expenses, you must set realistic retirement goals or you'll be retiring way past age 65. A whopping 34 percent of people surveyed said they thought they needed to save less than $250,000 for a comfortable retirement, according to the Retirement Confidence Survey (RCS) from the private nonprofit Employee Benefit Research Institute. Shooting for $250,000 can seem low, and the survey indicates that many people significantly underestimate how much they'll actually need to live comfortably once they retire. Use online retirement calculators to configure how much money you'll need to continue the lifestyle you had pre-retirement.
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3. Maximize your 401(k).
It's essential to take advantage of your employer-sponsored programs, such as a 401(k). In many cases, your employer will match a certain percentage of your contribution, so contribute as much as your company allows -- getting that match from your employer is practically free money. This year, you're allowed to contribute a total maximum of $500 more to your 401(k) and 403(b) plans than you could 2012, according to the Internal Revenue Service.
4. Diversify your accounts.
Just as you would diversity your assets when it comes to investing, you should also have a variety of types of savings accounts when it comes to retirement savings. These include a 401(k), a Roth IRA, a traditional IRA, traditional checking and savings accounts, and others. You don't need to have all of them, but you want to have both tax-advantage and taxable accounts available to you so that you avoid getting into a sticky tax situation down the road.
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5. Don't put all your assets in one basket.
Asset allocation largely depends on your risk tolerance and investment time horizon, and they work together: The longer you have until you retire, the higher your risk tolerance. For example, if you plan to retire in 30 years, it might make sense to invest all of your savings into common stocks. However, if you're in your 50s or 60s and are planning to retire soon, your risk tolerance is much lower and you should frequently reassess your portfolio. With a limited time horizon, the investments that make the most sense are in large-cap, blue chip stocks, dividend-paying stocks, or high-quality bonds, according to Investopedia.com.
Sarah Kaufman is the editor-in-chief of the Manilla Blog at Manilla.com, the leading, free and secure service that helps consumers simplify and organize all of their bills and household accounts in one place online or via the 4+ star customer-rated mobile apps. Sarah is also a regular contributor to Yahoo! Finance, Good Housekeeping, Woman's Day, Redbook, The Jane Dough and other sites. For more tips on saving money for retirement, visit Manilla.com.
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