By Ryan Velez
If you are a financial novice working hard to try and expand your wealth, it can sometimes seem like you’re in a tug of war when it comes to choosing how you go about this. Maybe the experts in your field are saying one thing, your personal financial professional is saying something else, your friends and family have their suggestion, and your gut is going a whole different way. It’s important to save ahead for retirement, so The Network Journal has profiled some of the time-tested ways to build wealth, and which ones work best for which situations.
Some may say that simply saving your money is not a recipe for making you wealthy. While this may be the case if you do it alone, saving is still an essential part of any smart financial plan, and the sooner you get started, the better. A 25-year-old who saves $450 a month in a tax-deferred retirement account and earns an average yearly return of 7% will have about $1.1 million by age 65. By comparison, if you waited until you were 35 to do the same, it would require $950 a month to reach roughly the same balance by age 65. 15% of your income should go into savings if possible, but if not, just do as much as you can. “Getting started, even if you’re saving 3% of your income or $10 a week, is the critical goal,” says Molly Balunek, a certified financial planner in Cleveland. “Once you see progress, it becomes easier to save 1% more, or $5 more a week.”
Another wealth builder that you can get started on right away is a Roth IRA. In the beginning, you fund this account with after-tax dollars, which may be a bit of a financial hit early on. But the payoff can be worth it, as if you’re at least 59A1/2 and have held the account for at least five years, your withdrawls are tax-free. You also don’t need to take required minimum distributions from a Roth, as you do with traditional IRAs and 401(k)s. Even start your children or grandchildren off on the right path by starting them with a Roth IRA, as children of any age who have earned income from a job can contribute up to $5,500 to a Roth IRA
When in doubt, bring on a professional to help you make the most of your financial situation. A certified financial planner (CFP), for example, offers guidance in strategizing retirement savings, allocating or managing investments, creating an estate plan, and performing other tasks. Don’t feel that this is only a service for those who are already rich. Some planners offer hourly rates while requiring no asset or income minimum. Services like GarrettPlanningNetwork.com. Full-service firms also offer “robo” adviser services with lower costs.