Most Americans avoid thinking about retirement. Partially because it feels so far away, and partially because the average American has an embarrassingly low $63,000 saved.

While this is bad news for employees who have been paying into Social Security their entire lives, it’s even more dangerous for the growing number of freelancers who make every effort to reduce their tax bill. Although these freelancers may be reducing their taxes now, they’re also lowering the Social Security payouts they will receive in retirement.

The reality is, whether you work for yourself or have a traditional job, maximizing your retirement income should be a top priority. The sooner you achieve financial independence, the sooner you can do what you love – free from financial worry.

Here are three steps you can take to ensure that you’re financially prepared for retirement when the time comes:

1. Take a hands-on approach to investing

 

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Over the last five years the S&P 500 averaged a 15% annual return. However, the average 401(k) went up a mere 7% during this same period! People who embraced a set-and-forget investment approach to their finances saw returns that were half of what they should have been.

Although smart investors don’t meddle with their investments on a daily basis, they do take an active role in ensuring the success of their financial futures. Smart and structured investing ensures that your net worth continues on an upward trajectory.

How can you maintain an active yet healthy involvement with your retirement account? One way is to use an app like Call Levels to get the latest trading alerts right to your phone. Invest the majority of your funds in stable ETFs, and then keep a bit of cash on-hand to quickly invest when market fluctuations provide short-term opportunities.

 

2. Diversify your investments

 

Concept of investment with eggs in the same basket.

Although it’s important to max out your 401(k) and IRA, don’t put 100% of your money into stocks. While the stock market historically goes up, there are times when it can get hit pretty hard. By diversifying your investments, you can protect against dips within a specific environment.

What are the alternatives to stock trading? There are many. Consider investing in real estate – either directly or via crowdfunding; look into P2P lending; and consider investing directly in startups through sites like WeFunder.

This diversity provides a cushion when the economy falters. By diversifying your own investments and income sources, you can prevent yourself from total loss if one market struggles.

 

3. Develop additional sources of income

 

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It’s said that the average millionaire has seven streams of income. While the wealthy often own stock and real estate, they don’t stop there. According to the classic book, The Millionaire Next Door, two thirds of all millionaires operate their own business.

One of the best ways to grow a residual income stream that can benefit you in retirement is to start your own business – whether that’s launching a blog, creating an online store, or simply buying a rental property. Owning your own business gives you the opportunity to invest your time rather than selling it.

Invest a few hours a week into a new venture and you may be able to fund your retirement exclusively from your business. Personally, I’ve been able to earn an extra $1,000-$2,000 a month from my blog. Although that’s not enough to replace my day job, it certainly helps bolster my savings!

 

How will you start preparing for retirement, today?

 

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Regardless of how you decide to maximize your retirement income, what matters is that you start now. Too many people put off retirement planning until it’s too late. If you wait until you’re 65 to take a serious look at your finances, odds are you’ll find yourself working for many years to come.

Instead, do the math today – and find a plan that helps you reach financial independence when it’s right for you.

By making money-conscious decisions today, you’ll have far more free-time, and far less stress, during your Golden Years.

 

Author bio: Rob Erich blogs about entrepreneurship and the digital nomad lifestyle at Money Nomad. He also discusses personal finance topics for InvestmentZen. When not working he enjoys traveling, meeting new people, and experimenting with his next business idea. Find him on Twitter at @MoneyNomadRob.

 

If you want to improve returns on your equity, forex, commodity and even bond investments by leveraging the power of market monitoring and real-time alerts, download Call Levels: