You work your entire life from a 9 to 5 job to save enough to buy a house and live peacefully after the age of 60. The retirement fund is one way to ensure that by the age of 50, when you will be sitting at home, you won’t need to worry about installments or depending on your children for your monthly expenses. But how can you boost your retirement fund that is the main question? In this article, we will discuss some very important tips that can help you boost your retirement fund if you are a homeowner in Los Angeles. So, let’s begin:
Tips to Boost your Retirement Fund
These tips include both the actions you should take before getting retired so you will get the most funds you will need and after retirement that you should not be dependent on anyone and live comfortably.
The first tip is before retirement.
Analyze your 401K and Roth IRA
401K and Roth IRA are the laws implemented by the Labor Law of the USA. An employee should take full advantage of these perks so they can get more funds when they retire.
A 401(k) plan is a tax-advantaged, defined-contribution retirement account offered by many employers to their employees. It is named after a section of the U.S. Internal Revenue Code. Workers can make contributions to their 401(k) accounts through automatic payroll withholding, and their employers can match some or all of those contributions. The investment earnings in a traditional 401(k) plan are not taxed until the employee withdraws that money, typically after retirement. In a Roth 401(k) plan, withdrawals can be tax-free. [Definition by Investopedia]
Ask yourself, are you really taking full advantage of your 401k employer plan? The best possible way is to get a 100% benefit from your 401K plan. In the USA, especially Los Angeles, most companies offer 50% contributions, and some contribute to a certain amount. But luckily, if you are one of those people who are fortunate to be employed by the companies who contributed 100%, then don’t hesitate to take up this offer. The good thing is you don’t have to pay taxes on this money as it is taking out of your pay before applying taxes.
On the other hand Roth IRA is:
“A Roth IRA is an individual retirement account (IRA) that allows qualified withdrawals on a tax-free basis provided certain conditions are satisfied. Established in 1997, it was named after William Roth, a former Delaware Senator. Roth IRAs are similar to traditional IRAs with biggest distinction between the two being how they’re taxed. Roth IRAs are funded with after-tax dollars; the contributions are not tax-deductible. But once you start withdrawing funds, the money is tax-free. Conversely, traditional IRA deposits are generally made with pretax dollars; you usually get a tax deduction on your contribution and pay income tax when you withdraw the money from the account during retirement.” [Definition by Investopedia]
It is another advantage which you can take during your employment. Although the money will be taxed but not after retirement when it will matter the most, do remember that as much contribution you will make to your Roth IRA account, the quicker it will boost your retirement funds.
Stash Extra Funds
Extra Money? Do you believe in spending or saving? If you want your retired life to be peaceful, then start saving rather spending. One of the best tips to boost your retirement fund is by making the best of your extra funds and investing it for the long term. If you get a bonus, extra salary, freelance job, or paid for overtime, use that fund to invest in retirement plans or stash the cash rather spending on luxuries. This cash will be repaid to you when you need it the most.
Rein your Expenses
Don’t create a list of extra expenses with every raise you get in your salary. Try to keep your expenses limited and use the raise amount in your retirement fund to get the most amount when you are 50.
Get a Second Job
Having a dual income is always good. Not only can you save more, but you can always rely on two jobs rather having just one. A second job will definitely help you boost your retirement funds. Keep the salary from one job to meet all your monthly expenses and stash the income from the second one to save for the future and after retirement. You can also use the second salary to invest in retirement plans available in the market. Youll have plenty of time and money when you are retired to take on vacations and to travel. One thing to look forward to is to retire early! So, save, save, and save!
Now, we will discuss the tips that you can apply after your retirement.
Payoff Pending Loans
Once you are retired, you won’t get a monthly salary. In such a case having debt on your head is like a full-time tension. The best way to kill it is by using your retirement fund to pay off all debts. Is your home loan still pending? What would happen if you lose the house in the auction just because you are unable to pay your monthly installments? Think on these lines. By paying the debts, you will be tension free from getting homeless at such old age.
Another advantage of using your retirement fund to pay off remaining debts is saving. When you pay a debt before the set tenure, you actually save yourself from paying the interest for that duration. Let’s take an example. You bought a house at the age of 40 on a 20 years mortgage. You agreed to pay a 10% interest every month. On average, your monthly interest amount makes up around $1500. Now, you get retired at the age of 50, and you still have to pay the installments for ten more years. 10 years means 120 installments, which means 120 X $1500, which is equal to $180,000.
By paying the total debt ten years earlier than the maturity period, you will actually save up to $180,000.
Sell Your Home
Selling a house can be beneficial in some cases if you bought a big luxury house while working as a Vice President of a company to live with all your children and family. Now, after your retirement, it’s only you and your spouse, and the house is huge, then selling it will be a good decision. Not only will you get another cozy place good enough for two of your people, but you can invest the rest of the amount for business or having a monthly income.
Renting the House
Same way if you are retired, and now your children are living their own lives. You and your spouse are only two people in a house with 5 or 6 bedrooms; it better to rent a part of it or to have paying-guests to keep your monthly expenses meet.
If you are living in a superbly beautiful suburb, or hillside, or a valley, you can turn your home into one of this bed-and-breakfast to have a running business that will pay your monthly expenses. You can use your retirement funds to turning your house in a cozy and attractive bed-and-breakfast.
In the age of the digital era, everything is turning to the internet. You can boost your retirement fund by adding extra cash in it and letting your home for paying-guest through Airbnb and such other services. Having extra money is never too bad.
By renting your house or having paying-guest, you will also save in some unexpected places, like the water and electric bills.
So, these are some basic tips you can start applying now as it is never too late to think about the future. Save now and live happily after you retire from your employment. If you have more questions about the whole process, see our FAQ page, read some client success stories, or continue reading more real estate articles, or contact us today!