Retirement savings requires careful planning and sustained effort, but workers in skilled trades face unique challenges when it comes to securing their future retirement. Skilled trades workers often work for themselves or for small businesses with few retirement savings options. They may also face fluctuations in income and work schedule which make it difficult to save consistently. However, there are still many ways that skilled trades workers can maximize their retirement savings. In this post, we will explore some of these tips and tricks.
1. Start Saving Early
One of the best ways to maximize your retirement savings is to start early. The earlier you start saving, the longer your money has to grow. Skilled trades workers who start saving for retirement in their twenties will have the advantage of compound interest, which can help their savings grow exponentially over time. Even if you are not in your twenties, any amount saved earlier is better than not saving at all. Starting early also means that you have more time to adjust your savings plan if necessary, without having to make a significant sacrifice.
2. Take Advantage of Retirement Plans
If you work for a company that offers a retirement plan, take advantage of it. Many companies offer 401(k) plans or other types of retirement savings plans. These plans come with tax benefits, including tax-deferred savings and employer matching contributions. Even if your employer does not offer a plan, you can still contribute to an Individual Retirement Account (IRA) on your own. Contributions to IRAs may also be tax-deductible up to a certain amount.
3. Contribute as Much as You Can
Retirement plans have annual contribution limits that vary depending on the type of plan. In general, the more you can contribute to your retirement plan, the better. However, don’t over-contribute and put excessive strain on your current finances. Set realistic goals and consider other financial obligations before deciding how much to contribute. The key is to avoid taking early withdrawals from your retirement accounts as much as possible before you reach the age of 59½. There are heavy penalties for early withdrawals that can significantly reduce the balance of your retirement savings.
4. Diversify Your Investments
Diversifying your investments is an effective strategy to maximize your retirement savings. Spread your investments across different types of assets, such as stocks, bonds, and exchange-traded funds. Diversifying helps to reduce the risk of significant losses from any one asset class. Having a balanced portfolio with a mix of different investments can also help generate long-term returns and steady growth. Remember, however, that diversification does not guarantee a profit and that past performance is not indicative of future results.
5. Be Mindful of Fees
One of the most significant costs of investing is fees charged by mutual funds, retirement plans, and financial advisors. Although they may seem like small percentages, over time, these fees can add up to a considerable amount of money. For example, on a portfolio worth $100,000, a 1% annual fee would cost $1,000 a year. Reducing fees can be a simple yet effective way to maximize your retirement savings in the long run.
6. Keep a Budget
Budgeting is another important strategy to maximize your retirement savings. Skilled trades workers often work for themselves, and their income may fluctuate from month to month. However, even with these uncertainties, having a budget is essential to saving a fixed portion of income each month. Start by tracking your income and expenses for several months. Then, set a reasonable amount for savings and stick to it. Tracking your spending will help you identify areas where you can cut back so that you can redirect that money towards your retirement savings.
7. Avoid Debt
Debt can be a significant hurdle to maximizing your retirement savings. High-interest debt like credit card debt, car loans, and personal loans can carry interest rates that eat into your retirement savings. Paying off debt as soon as possible is crucial to minimizing the amount of money you have to pay in interest. Avoid taking on new debt as much as possible, and prioritize paying off any outstanding debts you may have.
Bottom Line
Maximizing your retirement savings is achievable with the right strategies and a consistent effort. Skilled trades workers face unique challenges when it comes to saving for retirement, but there are still many ways to maximize their savings potential. Starting early, contributing to retirement plans, diversifying investments, being mindful of fees, keeping a budget, and avoiding debt, can help workers in skilled trades build a secure financial future. With patience and dedication, anyone can maximize their retirement savings and achieve financial security.
> For one on one or group assistance with personal finance, STR recommends that you check out the following resources:
> Inaccuracies with Bureau of Labor Statistics (BLS) data: Many of our blog posts will quote BLS data. SkilledTradeRescue.com has been able to identify that data quoted specifically for Skilled Trades can be as much as 50% LOW in many USA labor markets. For more information on these inaccuracies please visit the STR national labor survey page at the link below. On this page there is a video containing the latest information at the top of the page as well as other information. If you currently work in skilled trades, PLEASE consider participating in our national labor survey.
