4 Steps on Saving for Retirement & Why You Should Start Early
It’s safe to assume that most people will agree that having a good amount of savings before you retire is something that’s really important. Once you stop working, even if you do get a pension, having a nice cushion of money to pay your bills, move, go on vacation, or spoil your grand kids with will be really nice!
In fact, a study conducted in December of 2019, showed that almost half of all Americans made the resolution to save more money in 2020. It ranked just as much in importance as getting a lot more exercise, eating healthier and losing weight.
Saving for retirement can be tough, especially if you’re living paycheck-to-paycheck or don’t have a 401(k). Regardless of your situation, there are a few great tips for saving for retirement that you and your family can start implementing today.
Prepping for your retirement plan
STEP 1 – Know how much to save
Regardless of your retirement goals, or if you have yet to make any, good rule of thumb when it comes to saving for retirement is to save at least 15% of your income.
STEP 2 – Set a retirement goal
In order for you to reach your goals, you have to know what they are first. You need to begin by sitting down and mapping out exactly what your retirement plan looks like. Will you move to the beach? Finally buy that car of your dreams? Sell your house and move into a condo?
After you decide on your retirement goal, you’ll have to figure out the logistics for it. How long will it take, and how much money will you need? Are there initial costs or will they be steadily distributed over time?
STEP 3 – Pay off debts
You can’t really save money at all if you are still in debt! Debt is a huge reason why people of all generations are unable to save for retirement. The most important debts to get out of the way are credit card debts. Things like car payments and mortgages that have lower interest rates and are spread out with a specific plan of payment aren’t as crucial to pay off.
STEP 4 – Cut back on non-essential spending
This isn’t to say that you can’t have fun or go on vacation every now and again, but a recent study showed that the average American spends around $1,500 every month on non-essential items.
Even if you can cut your spending by $150 a month, that’s almost $2,000 a year that you can save toward your retirement plan! See if you can cut costs by cancelling out things that you don’t use or need like recurring subscriptions or cable.
Invest your income
If you’ve got a 401(k) though your employer and they match your contributions, make sure you’ve invested at least up to what they will match.
If you have a traditional 401(k), talk to a financial consultant about opening up a Roth IRA too. A Roth IRA is another version of a savings account for retirement. With this type of account, money that you put into it has already been taxed. After a period of 5 years, any money that you withdraw is all tax free, including the interest earned.
With the initial savings steps for retirement and taking advantage of a 401(k) and Roth IRA, you should be on the right path to saving for retirement! It will save you and your family a lot of stress in the long run and allow you to be able to fully enjoy the later years of your life. You’ve worked really hard for a long time and deserve to enjoy the fruits of that labor!
If you need any help saving, paying off debts, or setting up a 401(k) or Roth IRA, contact one of our experts today and we’ll get you on the right path.