Reaching your retirement savings goal is a milestone that will probably take many years to achieve. But the decisions you make don’t have to be complicated. There are only two aspects to retirement planning you need to understand: building up your retirement assets and making use of those assets once you retire.
Make saving a habit
Time is your ally when saving for retirement. Small amounts invested regularly can build up large balances over decades. Automatic contributions to your retirement accounts make saving easy so you don’t have to worry about fitting it into your budget every month.
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Select the right kind of Homestead Funds account
Accounts designed for retirement help you by reducing the impact of taxes as you save. If you’re already contributing regularly to your employer-sponsored retirement plan, that’s great. A retirement account such as a Traditional or Roth IRA is a good tool to supplement your savings. It’s also possible to save for retirement in individual or joint taxable accounts. Those options can be beneficial for some people but not everyone, so you should discuss the option with a tax or financial advisor.
Account types appropriate for this goal:
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Choose your investment type
It’s important to select investment types that align with your investment goals and time horizon. Typically, the further away you are from retirement, the more heavily you will be invested in stock funds. Equities carry a higher degree of risk (meaning more volatile) but historically have delivered higher long-term returns. As time goes on, you’ll want to consider an asset mix with fewer equities and more fixed-income funds. Homestead Funds offers funds across these categories to help meet your investment needs.
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Set a schedule
Depending on your retirement account, you might be required to take distributions after a certain age. Or, you might just want a monthly check you can depend on. Homestead Funds can help you set a distribution schedule according to your needs.
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Account Considerations
Many people end up with a mix of different account types in retirement. It’s usually smart to take income from accounts that have required minimum distributions first. For other accounts, you’ll need to know whether and how distributions will be taxed. You should work with a financial planner or tax professional to determine your distribution.
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Debt securities are subject to interest rate risk, credit risk, extension risk, income risk, issuer risk and market risk. The value of U.S. government securities can decrease due to, among other factors, changes in interest rates or changes to the financial condition or credit rating of the U.S. government. Investments in asset-backed and mortgage-backed securities are also subject to prepayment risk as well as increased susceptibility to adverse economic developments. High-yield, lower-rated, securities involve greater risk than higher-rated securities. Equity securities generally have greater price volatility than fixed-income securities. The market price of equity securities may go up or down, sometimes rapidly or unpredictably. Equity securities may decline in value due to factors affecting the issuer or equity securities markets generally.
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Once you’re ready, start here.
The sooner you begin investing, the more time you have to reach your goal.
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