Jigsaw Puzzle

5 Of The Best Ways to Plan for Retirement

5 Of The Best Ways To Plan for Retirement

Brown Puzzle Pieces

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Planning for Retirement is Like a Puzzle

Although it may seem like saving for retirement isn't possible, it may be a simplier process than you think. Try thinking of retirement as putting together pieces of a puzzle. Some pieces are larger, some are smaller, some areas are more difficult to figure out, and some are easier to figure out,

For most adults under 25, it may seem like retirements is a lifetime away, and something that you can worry about later. For others, it may feel as if retirement is around the corner and you can feel far behind. Whichever group you fall into, it's important to start saving now, so that you can take advantage of compound interest to do the heavy work for you. Starting as early as possible can make a huge difference in ensuring you have the funds to enjoy your life comfortably when you retire.

A Close-Up Shot of a Person Doing a Transparent Puzzle

5 Of The Best Ways To Plan for Retirement

Step 1: Save and Invest as Early as Possible

Start saving early. If you didn't start to plan for retirement early, there’s no better time to start planning than right this very moment, regardless of your age or where you are in your career path. But don't worry, if you're like most people and just starting to plan for retirement that's okay too. Planning retirement is a process. Each step starts with assessing your income and expenses for each financial phase you're in. Here are some other posts where I talk about how fixing your budget can help you plan for retirement:

Make a budget to pay off debt faster

How to Save on Medical and Health Expenses

How to Save on Dental and Vision Expenses

If you're already saving for retirement, keep going! You have probably already learned that saving money is a very rewarding habit. If you haven't started saving yet, the time to start is now! Start small if you need to, and increase it every month or every paycheck if you can.

Notebook and Envelope with Money

5 Of The Best Ways To Plan for Retirement

Step 2: Invest in a 401k and company match

One of the easiest, and mindless ways to save for retirement is by taking advantage of your company sponsered 401k. With a 401(k), you put a small portion of each paycheck automatically into this account. In many cases this is a win-win sitation. Not only does the small portion you put in this account come out of your check before taxes, but it also lowers your current taxable income because you are bringing less money home.

If your employer offers a 401K, use it! Employers typically offer a dollar for dollar match on contributions to this plan. If they offer a 3% match, make sure you are contributing 3% to your plan. Otherwise, you’ll be leaving free money on the table. Since this is pre-tax income, you probably won't notice much difference in your paycheck.

Here's an example of one scenario below:

Chart to Plan for retirement using a scenario of paying into a 401k or not paying into a 401k

The difference between thel take home amount in these checks is only $39.00, even though we are contributing $50.00 to our 401k. Additionally, we can see that by contributing 5% to our 401k, and getting the 5% company match, we are earning $100.00. This $100.00 is just the base amount also, because we will be earning interest on this amount also that will continue to grow year over year!

At minimum, contribute enough to get the full employer match, because that's like an instant 100% bonus on your money. You can set your contributions to automatically increase over time so you're consistently saving more as you get raises. The annual contribution limit for 2024 is $23,000, or $30,500 if you are age 50 or older.

More than likely, your 401k is going to be your biggest piece of the retirement puzzle. It's relatively easy to save this money since it's on automatically taken from your check without you having to do much other than fill out a form from your employer. Everything you earn in the 401k is tax deferred. As long as the money remains in the plan, you owe nothing as it grows.

5 Of The Best Ways To Plan for Retirement

Step 3: Invest in a Traditional or Roth IRA

If your employer doesn’t offer a 401K or you’re self employed and you still want to plan for retirement, you have the options of traditional IRA and Roth IRA through your bank or credit union or an investment broker. Both of these have their own stipulations and guidelines. If you feel one of these may work for you, talk to your bank or credit union. They will be happy to discuss the options with you and help you figure out which one best fits your specific situation.

You can also begin an IRAs through Robinhood. They offer a 3% match to your IRA also. This can all be done on the Robinhood app where you buy stock also. tend to have a better dividend than a basic savings account at your bank, so these are recommended first. However, if you really can’t participate in one, setting up a weekly or monthly contribution to your savings account is a good start. 

5 Of The Best Ways To Plan for Retirement

Step 4: Invest in Stocks

Investing in stocks is another way to plan for retirement. You can not only learn, but also get some extra cash for your retirement. Depending on who you ask, some will say you need to be completely debt-free before you invest. However, debt takes some people a decade or more to pay off. Personally, I'd rather ensure at least some of my money is being saved and invested to take advantage of compound interest while I'm working on paying off debt.

If you've spent much time on my blog, you know I frequently talk about building a snowball to increase the amount you pay off each month toward debt. I also advocate for creating a savings snowball as early as possible to plan for retirement and take advantage of compound interest and building retirement funds.

There are several different apps that you can use to begin to invest in stocks to help plan for retirement. There are two that I do recommend and two that I don't recommend. I'm going to share with you why I don't recommend these two places so that you know what you're not looking for. Stash and Acorn are two that I don't recommend. Both promote eye catching sign up bonuses which makes them seem like a great deal. However, both require you to pay a monthly fee to use them, which quickly eats up any “bonus” you got for signing up.

Stash also promotes a “Stash Party Wednesday” where every Wednesday if you click on the link they send, you get a fractional shares of stock and then they want you to promote to your friends. This also seems like a good deal, until the next day when you see you got .11 to .20 cents worth of stock. Which again, even when you add up the 4 weeks in a month, you're still losing money because you have to pay a $3.00 or $9.00 montly service fee. Similarly, Acorns fees are $5.00 a month and there's really no perk you get which offsets it.

So where can you go to do some individual and ETF (group) stocks that isn't all gimmicky and flashy but you're really just losing money? I've got two places that I both use and suggest. I would rank Webull a 6/10 and Robinhood a solid 10/10. You can sign up for both, and see which you prefer, but let me give you the reasons for my rankings, first.

Close Up Photo of People Holding Puzzle Pieces

Webull offers a sign up bonus with my link of up to 20 fractional shares of stock. There is no monthly service fee, so that is great! However, the Webull app looks very intimidating to me. It's got charts, graphs, and all kinds of buttons and analyzing things – which is great, if you are into those kinds of things and understand them. But if you're just starting out it can be overwhelming, and I'd rather have you focus on an easier to understand system.

Robinhood is my absolute favorite place to recommend for stocks. It's easy to sign up, and the app is easy to navigate. You also get free fractional shares of stock when you sign up with my link at Robinhood. When you are interested in purchasing a certain type of stock, you can type the name in the search bar and it will tell you the daily and yearly high and low amounts of the stock, the dividend (interest) percentage you would get, it tells a little bit about the company, any recent articles about the company and it gives a recommendation percentage of whether you should buy, sell or hold the stock.

White Samsung Android Smartphone on Brown Wooden Table

You then click the “trade” button and it asks if you want to buy the stock. You can choose to buy the stock by fractional shares – 1/2 a share, 1/4 share etc, or you choose to purchase in full shares. You may be wondering why people would buy fractions of shares of stock. This is a way to slowly purchase more expensive stock as you are able instead of waiting until you have all the money to buy a whole share.

Several years ago when I was just beginning to invest in individual and ETF stocks, Amazon and Google were over $1,000 for one share. I bought fractional shares as I was able to, and it made buying stock much easier. Webull and Robinhood both offer this fractional share purchase option. I don't recommend trying to day trade or time the stock market. This is something that many people lose a lot of money on, and it is very risky. I am strictly a buy and hold to plan for retirement kinda gal!

5 Of The Best Ways To Plan for Retirement

Step 5: The Stability of a CD

CD's or Certificates of Deposit, are an account offered by banks and credit unions. With this account, you put a specific amount of money in for a fixed period, and in return, you receive interest on your investment. CDs are considered low-risk, making them an attractive option for conservative investors and a great piece to add to your retirement puzzle.

One of the key advantages of CDs is their stability and predictability. When you plan for retirement, it's important to have a portion of your puzzle in low-risk investments to keep your money safe. While the other options we talked about depend on the stock market, CDs provide a fixed (not changing) interest rate and maturity (when the money can be taken back out) date. This means you get a guarantee that your money will grow by a certain percent. This offers a sense of security and predictability in your financial planning.

CD's have been very popular recently because their interest rates went up substantially. Currently, many online banks are offering rates of up to 5.5%, which is a great rate for a CD that has a guaranteed return. Knowing that a portion of your savings is steadily growing can bring you peace of mind when you plan for retirement, especially when faced with economic uncertainties. By spreading your assets across different types of investments, including CDs, you create a balanced and diversified portfolio that can weather market fluctuations.

There is also a strategy with CD's that you can use to plan for retirement. A CD ladder involves putting your money in various CDs with different maturity dates. As each CD matures (comes due), you can reinvest the proceeds into a new CD or use them for other investments. This strategy gives you flexibility while maximizing the amount of interest earned.

5 Of The Best Ways To Plan for Retirement

The Power of Time and Compound Growth

No matter your current situation, starting a retirement savings routine now and sticking with it can make a big difference with the power of time and compound growth working in your favor. Consider using a retirement calculator to input different savings scenarios and see how small adjustments like increasing contributions by 1-2% annually or contributing a few years earlier can multiply your nest egg significantly by retirement.

Saving may not come easily or feel possible some months, but stay focused on the future you and make it a priority to plan for retirement savings alongside your necessities. Seek employer matches, maximize tax-advantaged accounts, purchase individual stocks, and purchase CD's to diversify your retirement puzzle. With discipline and patience, you'll be well on your way to a comfortable financial future.

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