Most of us want to retire someday. In fact, some may even have a plan for what that will look like, and all the things they want to do. Others just know they do not want to work all their lives. Whether you have a plan for what you want to do in retirement or not, without proper planning and preparation it may never come to fruition.
Planning for retirement can seem daunting. It does not have to be. Put the following basic retirement savings tips into practice to help you get started.
Make a plan and identify your goal. When planning for retirement, consider the age you would like to retire and what kind of income you would like to have. Both are important, and one may influence the other. There is not a one-size-fits-all number you need to save, but most experts suggest aiming to replace 80% of your income in retirement.
Once you determine how much you will need, use an online calculator to see how much money you need to save to reach that goal. You may have to start out smaller but save as much as you can. Things will change over time (life-changing events, inflation, sickness, changes in taxes, etc.), and you may have to revisit and adjust your savings goal. But, if you don’t know where you are going, you probably will not get there.
Start saving as early as you can. The sooner you start saving for your retirement, the easier it is to save. Starting during your first job, with your first paycheck is ideal. The longer you put it off, the harder it is to start and to make up for lost time on your investment. Time and compound interest can be your best friends in saving for retirement. The longer you save, the more time your money has to work for you. Wherever you are in the journey, the key is to start saving now for retirement.
Take advantage of your employer match. Some employers offer matching retirement contributions. This can be a huge help in reaching your retirement goals. Don’t miss out on this free money. You will not find a better return on your investment. Be sure to save enough to get the full employer match. If you can save more, do it.
Automate your retirement savings. Do you ever forget things? You may not be as prone to that now, but as you age, it happens. So, leverage technology and automate your retirement savings. If your employer has a retirement plan, like a 401 (K) or 403 (B), have the contributions withdrawn directly from your paycheck and put into your retirement account. If your employer doesn’t have a retirement plan, and you set up an IRA or ROTH IRA, have contributions automatically withdrawn from your checking account.
Stay Consistent. Many things keep people from being consistent. They change jobs and don’t keep saving. They fail to live on a budget or live outside their means. They are unprepared for financial difficulties that arise. In order to save consistently, you should…
- Develop a budget and stick with it.
- Have an emergency savings fund.
- Don’t just live for the here and now. You may have to adjust the percentage you save (and that’s okay), but make sure you keep saving.
Invest for the long haul. In a pinch, it is easy to cash out your retirement savings early. If at all possible, don’t do it. Cashing out your retirement savings early means you will pay taxes in a lump sum and face an early withdrawal penalty. That could cost up to 30% of your savings! Stay invested, keep saving, and plan ahead. Your future self will thank you.
Saving for the future is a marathon, not a sprint. It takes discipline and a plan. It can be easy to let life get in the way of your retirement savings. With the right plan and the right actions, you can enjoy your life now and still make progress toward your financial goals.