The definition of “middle class” has evolved over the years, but one thing remains the same. That means middle-income earners aren’t keeping up with inflation. The American middle class’s share of the country’s total wealth has fallen from 37% three decades ago to 26% in 2022, according to the government data website USAFacts. During the same period, the average income of middle-income households increased by 31%. Consumer prices almost doubled.
One of the result is that dollars today are not as pervasive in the middle class as they once were. This puts increasing pressure on America’s middle class to develop smart retirement planning strategies. Here are six tips to help you save for your golden years.
Prioritize Savings
Working middle-class people are by no means wealthy, but most people should still have some money left over after paying their monthly bills.
All or part of this money should flow into retirement savings so that it becomes an integral part of your financial routine. Setting up automatic transfers is one way to ensure your savings grow each month.
Contribute to your employer’s retirement plan
If her employer offers her 401(k) or other retirement plan, enroll and contribute. This is the best and easiest way to start building your retirement savings because you can grow your income tax-free and the money is automatically deducted from your paycheck.
If your employer matches your contribution, it will be added to your emergency fund for free.
Invest in an IRA
If you don’t have access to a 401(k) or retirement plan, start investing in an individual retirement account or IRA that acts as your retirement fund. IRAs offer tax benefits similar to 401(k)s.
Even if you have a company-sponsored plan, you may want to invest in an IRA to save faster.
Maximize Your Contributions
In 2024, employees with traditional 401(k) and similar plans will be able to contribute up to $23,000 annually. If you’re 50 or older, your “catch-up contribution” is an additional $7,500. In 2024, the maximum amount he can contribute to an IRA is $7,000. However, if he is over 50 years old, he will also be paid an additional contribution of $1,000, making his total $8,000.
Maximizing your contributions can help your savings grow faster.
Diversify your portfolio
In addition to investing in your retirement savings, you should also invest in other savings and investment vehicles to ensure a balanced portfolio. Options include high-yield savings accounts, certificates of deposit, money market accounts, and alternative investments such as stocks, bonds, mutual funds, exchange-traded funds, real estate and business ventures.
Hire an Expert
When planning for retirement, you need to develop an investment strategy that maximizes returns while minimizing risk. Most Americans lack expertise in this area. Therefore, you should consult a financial advisor for proper planning.
For best results, look for a consultant with professional qualifications such as: B. “Certified Financial Planner” and “Certified Financial Consultant” qualifications.