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As much as we’d like to think of our lives as a long trip on a smooth and level highway, the truth is that we often encounter unexpected detours, potholes and traffic jams. This can mean we end up stopping or delaying our plans to save for retirement while we sort out life’s roadblocks.
Major life changes like losing a job, experiencing a major medical event or losing a spouse are all good reasons to stop investing for a short while. In times like these, you need to focus on your family’s immediate needs.
But the time will come when you must hit the road again and get back to your retirement savings plan. Depending on how long you’ve been on the sidelines, you may have some serious catching up to do.
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Here’s our advice to help you get back on track.
Tread a Familiar Path
If you already have experience in investing for retirement, you know well what you need to do. Simply reactivate your contributions to your employer retirement plan and your Roth IRA so you are investing 15% of your income again.
For those of you just getting started, or if you’re starting a new job, ask your human resources department for details about the company’s retirement plan. If they offer a match, start contributing enough to receive the full match as soon as you’re eligible—it’s an instant 100% return on your money!
Next, open a Roth IRA and contribute the remainder of your 15% there.
Put the Pedal to the Metal
If you’re over age 50, you can make up for lost time by taking advantage of catch-up contributions. You can invest an additional $1,000 in your Roth IRA for a total of $6,500 each year, and you can invest an extra $5,500 in your employer retirement plan for a total of $23,000 each year.
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For most people, increasing their contributions will mean investing more than 15% of their income. So we don’t recommend you take this step until your kids’ college is fully funded and your home is paid off.
Ask for Directions
You can feel more confident that the course you’re on will get you to your final destination by working with a financial advisor. An advisor can help you blow the dust off your retirement accounts by helping you rebalance your portfolio and review your investments to make sure you still have good, growth stock mutual funds working for you.
If you’re new to investing, an experienced advisor with the heart of a teacher can help you understand how investing works so you can make good decisions. Your advisor can help you set up your accounts, choose your mutual funds, and make sure you stick to your plan for the long term.
Finding an advisor you can trust to work in your best interests can be tricky. Dave’s team can put you in touch with a knowledgeable, trustworthy advisor in your area today!