3 Principles To Save Money for Retirement
Three Simple Principles That Will Help You Save Money for Retirement
If you’ve been thinking about your retirement, you might have this question on your mind – ‘How do I save money for retirement?’ You’ll often come across flashy advertisements and click-bait articles on the Internet that promise to teach you how you can save a million dollars in 6 steps.
But many of these self-proclaimed financial gurus are simply out for their own profit. Very often, they’re selling products, books, or subscription services that you don’t really need, claiming that they contain valuable insights when that’s not really the case. As a result, it’s very easy to become cynical and distrustful about online financial planning resources in general.
My advice is simple – do not trust any person who claims they’ll teach you exactly what you need to do to retire wealthy. That’s because financial stability and retirement are goals that can be achieved in any number of ways. It all comes down to 3 simple commonsense methods –
· Start Planning Early
· Have a Late Retirement
No matter where you go, this is the advice every financial planner will give to you, in a nutshell. All you have to do is practice disciplined financial habits, live frugally, and save more.
We can’t say for certain whether you’ll be a millionaire by the time you retire or not. It’s important to be realistic in your assumptions though. Some financial gurus make outlandish claims where they project a net worth of $1 Million with your portfolio’s annual returns estimated at 20%. That’s simply not possible – the market does not award such high returns consistently.
For all intents and purposes, you’re better off assuming a 5 – 7% average rate of return. And like we mentioned earlier, you can reach this number sooner if you start earlier.
If you want to save money for retirement, that means living a frugal lifestyle. You must limit your luxuries to the bare minimum and only spend after you’ve allocated enough to your savings.
Retiring late means that your savings have had more time to increase and grow. Retiring late also allows you to delay your social security benefits, thus resulting in higher benefit payments when you eventually start collecting them.
You will receive significantly larger amounts from Social Security if you decide to postpone your retirement. As a result, your nest egg doesn’t need to be too high since your Social Security benefits will supplement your income generously throughout your remaining retirement years.
While we’ve discussed how you should save money for retirement, what level of wealth is enough for a person to retire peacefully? Would a million dollars suffice? Unfortunately, financial planners believe that a million dollars might not last you throughout your remaining years due to factors like inflation. As a result, it makes sense to work for as long as you’re physically fit and healthy.
Saving money for retirement is not rocket science – start planning early, save more money, have a late retirement – and you’ll be able to spend your twilight years in peace and happiness, free of financial worry. All too often, when a young person lands their first job, the last thing on their mind is setting aside money for retirement. They’re more concerned with paying for a new car, apartment rent, and other obligations.
Many of them have no budget, nor have they been trained in personal finance. What’s especially disappointing is that many employers have some type of retirement plan in place and usually make a matching contribution, and some employees don’t take advantage of it. By starting to save early, and if only a small amount is saved, it will still add up and grow over the years. We all should save money for retirement by taking advantage of these opportunities.