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One of the biggest challenges that people face during their lives is planning for a financially secure retirement. Having a financial cushion necessary to retire and to live a fulfilling life requires a great deal of forethought. While many companies help people to save for retirement, business owners and others need to understand how to save effectively on their own. For a lot of people, the thought of retirement planning is so overwhelming that they simply keep putting it off, which could jeopardize their savings in the long run. Furthermore, a number of myths and misconceptions color the ways in which people think about retirement. Below are some of the most common considerations related to retirement planning:

1. Saving for Retirement

bankingThe truth is that individuals are never too young or old to start planning for retirement, according to financial planners. As people enter their 40s or even their 50s without a retirement plan, it is common for them to think that it is too late to start saving. While it is true that starting to save in your 20s or 30s may provide you with more of a cushion for retirement, it is possible to make up this time, according to financial planners. In addition, it is much better to start saving at 50 than at 70, just as it is better to start at 30 than 50. Individuals in their 20s may think that they are too young and instead choose to spend their money on other pursuits. However, financial planners say that this mentality ignores the benefits of compound interest. For instance, someone who invests $25,000 at the age of 25 with a 12 percent return will have more than $2 million when he or she reaches retirement age without adding another dollar to the account.

2. Tools to Invest

In today’s world, individuals have a broad array of tools to help them invest wisely. Many of these tools were developed by trusted experts to make the process quick and foolproof. Individuals should seek out online investment tools to help them create a profile that aligns with their goals, financial planners say. In order to do this, they need a decent idea of what their goals are. Individuals often think that they do not have enough money to invest in retirement, but even those who make minimum wage throughout their lives can retire as millionaires. As an example, a 25-year-old who sets aside less than $25 each week for retirement will have earned more than a million dollars when it comes time to retire.

3. Inflation Concerns

businessInflation is a real concern among investors. In all likelihood, a $100 bill will have significantly less purchasing power a decade from now. However, keep in mind that the same $100 bill will have much more purchasing power than an investment of $0. Investors understand that solid investments will outpace inflation, making it more worthwhile to invest the $100 than to put it in the bank. Of course, this raises concerns about the volatility of the investment market. Financial professionals are paid to balance risk, and there are investment vehicles that allow individuals to choose how much risk they wish to accept.

According to financial planners, a fear of market volatility tends to grow out of a lack of understanding of the market, which is why individuals should find trusted investment services. Long-term investment is widely seen as the most effective way of growing retirement savings, even with the 2008 recession. Individuals may find comfort in the fact that investments are long-term, so losses that occurred in 2008 have since been regained. Throughout history, stocks have been fairly consistent in their growth.

4. IRAs and Roth IRAs

A great place to start saving for retirement is with a traditional IRA or a Roth IRA, according to financial planners. Both of these function as a sort of retirement savings account from which people can invest their money. Financial planners say that the best reason to use an IRA is for the tax benefits. While contributions to a traditional IRA are excluded from taxable income, individuals pay taxes on the money when they make withdrawals during retirement. On the other hand, a Roth IRA involves income that has already been taxed and is not taxed again during retirement. The drawback to both types of accounts is that the federal government caps how much individuals can contribute to them each year.

Financial planners generally recommend that if you work for an employer that matches contributions to a pension account, it is best to contribute to this account up to the employer’s match, since that will effectively double the investment. After individuals have reached that amount, however, they can gain more flexibility through other investment services. Employer-sponsored accounts are usually 401(k) plans, although it may be called a 403(b) or a 457(b) for nonprofit and government employees. Small business may adopt a SEP-IRA.

People may also want to consider creating a separate investment account that raises money toward less liquid assets, such as a new home or an investment home, financial planners say. Of course, individuals should ensure that they also have a safety net in case of an emergency, so some degree of liquidity in investments is critical.