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Retiring comfortably takes proper retirement planning, so the earlier you start the better. The amount you’ll need largely depends on where you live.
According to a recent GOBankingRates study regarding the cost to retire comfortably in each state, Mississippi requires the least annual retirement funds at $62,154, and Hawaii requires the most at $131,175 per year.
So, if you’re planning to retire at 65, you’ll need between $1 and $3 million — at least — to sustain you for 20 years after you stop working. But will that be enough? The truth is that you should build a nest egg that will sustain you for 20 years and beyond — an achievement that doesn’t happen overnight.
The good news is that if you’re still in the early stages of your career, you have time to make significant progress on your retirement fund. To help, here are the smartest money moves two retirees made in their early years, allowing them to retire with enough money to live comfortably.
Retirees’ Smartest Money Moves
Aapt Dubey from Word Finder Hub was an engineer for 35 years and has been retired for a decade.Liz Hutz, owner of Liz Buys Houses, retired from financial planning and consulting after being in business for 30 years. She’s been retired for five years.
Here are the smartest financial decisions they made early allowing them to live a comfortable retirement now:
Maximized Contributions to Retirement Accounts
Dubey said he consistently maxed out his 401(k) and IRA contributions.
“This allowed me to benefit from compound interest and tax advantages, significantly growing my retirement savings,” he said.
“I continued to put more money into my 401(k) and IRA accounts while taking advantage of tax credits and employer matches. This disciplined approach has led to significant growth in my retirement savings.” Hutz said.
A huge benefit of maxing out your 401(k) contributions is if your employer offers a match. Employer matching is when your employer matches the amount you contribute up to a certain amount yearly. The match is a percentage of your contributions or salary or simply a flat dollar amount. Regardless, it will help you build your retirement fund faster.
Most experts agree you should contribute enough to receive your employer’s full match. Otherwise, you’re leaving free money on the table.
Diversified Investments
Both Dubey and Hutz said they diversified their portfolio early on by investing in stocks, bonds and real estate.
“This diversification reduced risk and ensured steady growth over time,” Dubey said.
Diversification is a great strategy for long-term investment success. However, you shouldn’t just set it and forget it.
Instead, experts recommend checking your asset allocation annually, or sooner, if you have a significant financial change occur, such as a job loss or a big bump up in pay. During these checkups, you can decide whether your portfolio needs rebalancing or if you should reconsider any of your current investments.
Debt Management
Dubey said he prioritized paying off high-interest debts, like credit cards and car loans, early in his career. “This saved me a lot on interest payments and allowed me to allocate more funds toward savings and investments,” he said.
Hutz managed her debt in the same way.
“Living within your means and effectively managing debt can free up more resources to save and invest,” she said.
Emergency Fund
Hutz created and maintained a solid emergency fund early on to provide financial security. She said this was like a safety net that prevented her from losing her investments in case she needed money.
Continuous Learning
Another wise money move that allowed Hutz to enjoy a comfortable retirement was her decision to stay informed about financial trends and adjust her strategies accordingly.
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She said by continuously learning, she ensured her investments were consistent with market conditions and her long-term goals.
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