7 Ways To Fund Your Retirement Income

While high corporate debt levels and Fed rate hikes might make you worry about the economy, if you’re age 40 or more, you need to think beyond the financial issues of the day and think about how much you need to retire comfortably in the next 20 years.

Here are three rules of thumb that will help you transform your retirement planning:

• Recognize that you have to do more than fund a 401(k) or an IRA or rely on Social Security benefits.
• Understand that you can’t only rely on your company or the government to take care of your retirement for you.
• Appreciate the value of getting better at money management and increasing your knowledge of investments.

How to Fund Your Investments

The fastest way to begin to set aside money for your retirement is to fund your investments rather than relying on your monthly salary. One way to do this is by looking into reverse mortgages. This is a unique type of home loan that allows you to convert part of the equity in your home directly into cash. In other words, the equity that you paid over many years as you made mortgage payments can now be paid to you. 

You can also download some guides to help you learn more about reverse mortgages, managing your personal savings in retirement, and how to start savings for retirement.

7 Ways to Boost your Retirement

1. Start a 401(k) plan.

If you have an employer who offers a 401(k) plan be sure to sign up for it because it will allow you to contribute your pre-tax dollars. As you can imagine, this can be highly advantageous. If your employer also offers to match what you put into your 401 (k) plan, be sure to take advantage of this opportunity. Let’s say an employer agrees to match half of employee contributions all the way up to five percent of salary. This means that if you earn $25,000 a year and contribute $1,250, your employer will contribute $625. This is free money!

2. Open up a Traditional or Roth IRA.

An individual retirement account (IRA) can help you put money aside for retirement. According to the Motley Fool, “If you save $5,500 in an IRA for 30 years, you could build up a retirement nest egg of more than $900,000, based on the stock market's historical performance. This translates to $458 per month to completely transform your retirement.”

Essentially, you have two choices: a Traditional IRA and a Roth IRA. When you use either type your money grows tax free while it is in the account. With a traditional IRA, you will pay your taxes after you withdraw money from your account. With a Roth IRA, it’s just the opposite. You pay taxes before you put the money into the account, but you don’t pay taxes when you make a withdrawal. Naturally, you’re probably wondering which is better. This Merrill Edge Selector Tool will help you calculate.

3. Catch up on your contributions if you’re 50 or older.

Ideally, you should have started saving early because there is a limit to how much you can contribute each year to either your 401(k) plan or your Roth IRA. However, if you’re 50 or older, you are allowed to contribute more. This gives you an opportunity to catch up.

4. Start a savings account.

Besides opening up retirement accounts, set aside money into a savings account. This will usually work out best if you are able to automatically set aside a percentage of your income directly into your savings account.

5. Manage your money better.

It’s only too easy to spend more than you earn because we are surrounded by temptations. One way to prevent financial “leaks” is to create a budget and use a cash flow calculator. This way, you’ll only spend within your limits, and you also have some money to put toward your nest egg.

6. Delay your Social Security

While you’re eligible to receive your Social Security benefits by age 62, every year you delay getting your Social Security payments before age 70, the more money you will receive in the future. Since the monthly benefits will increase, your income can begin to add up quickly.

7. Learn how to become an investor

While savings and contributing to a retirement account are stable ways to set aside money for retirement, another way is to invest in real estate or the stock market. However, there is some risk involved and this should only be done if you have sufficient knowledge or experience. The main advantage of aggressive investing is that it can result in significant growth, especially over the long term. Allocating a certain percentage of your savings toward investments can be a faster way to plan for retirement if you didn’t start saving or contributing to a retirement account before age 40.

Work with a Financial Expert

While these 7 strategies are commonly accepted ways to build your nest egg, it’s important to work with a financial expert when making your financial decisions. If you don’t know much about finances, they can help you avoid costly errors, and if you are a good money manager, they can serve as a sounding board to help you make better decisions.