Financial professionals caution against the practice of “keeping up with the Joneses” as it can lead to financial trouble. It’s important to manage money according to personal goals and not compare oneself to others. While saving for long-term goals like retirement, it’s easy to feel like you’re falling behind, but it’s crucial to remember that everyone’s financial situation is unique. Data from Fidelity shows median 401(k) balances ranging from $6,700 for those in their 20s to $64,300 for those in their 50s.
To catch up if you’re behind on retirement savings, financial planners recommend automating savings, escalating contributions, and taking advantage of any employer matches. Automating contributions ensures consistency and discipline, while increasing contributions over time allows for more savings without feeling the impact. Additionally, maximizing any employer match provides a significant boost in retirement savings, essentially earning free money. It’s crucial to avoid taking on extra risk in pursuit of higher returns, as this could jeopardize long-term financial goals.
Fidelity recommends having the equivalent of annual salary saved by age 30, three times salary by age 40, and six times salary by age 50, with the goal of saving eight times salary by age 60 and 10 times salary by age 67. Setting up automatic contributions from paychecks or bank accounts can help individuals stay on track with their retirement savings goals. Financial planners also suggest gradually increasing contributions over time as income grows and taking full advantage of any employer matching contributions.
While it may be tempting to chase high returns by investing in riskier assets or speculative ventures, the key to building a secure retirement fund is to maintain a diversified and balanced portfolio. Making informed decisions and avoiding impulsive moves can help ensure long-term financial stability. By following these strategies and focusing on personal goals rather than comparing with others, individuals can work towards a secure financial future.
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