The right time to plan for your retirement is now. If you realize this early enough, the better it is for you. But if you have not started taking steps to save for retirement, you really have no worries, you are actually not alone on this. It is, in fact, not too late for you to learn how to save for retirement, and make your life worth living.
If you are just kicking off with saving for your retirement, and nearly done with working, here are key points to note;
- If you are just beginning , put so much focus on your savings goal.
- There is never too late or too early a time to start saving for your retirement.
- If you are cruising fast towards retirement, you should consider delaying your social security or speed up contributions towards your retirement savings.
While everyone knows it is crucial to plan towards retirement, a lot of people however do not have a single dollar sleeping in their nest egg. And the common excuse is that they do not know how to start saving for retirement.
A study according to Ramsey Solutions revealed that 50% of the American population aren’t saving yet for their retirement. And the few ones who are already taking steps aren’t saving enough.
In 2020, 49% of Americans have revealed that their year resolutions featured ‘saving money’. That’s a good move. But without taking action, wishes remain a pipe dream. Make move in a different direction to get better life when you retire. And you know the beautiful thing?
Saving for retirement is actually not as difficult as many of us think!
Finance expert, Dave Ramsey covered three practical steps on his advice on saving for retirement. We will be taking a look at these steps together and more ways to achieve our savings goal.
If you are ready, let’s dive in!
First step: Set A Target On Your Retirement Savings
If you wish to attain your dreams on your retirement, you should first take a look at where you are right now, look into your future of attaining your retirement plans, then plan to make it a reality.
Sit down. Think clearly on what you envision for in your retirement. Do you see yourself somewhere on a beach taking sips on piña coladas? Do you see yourself spending time out with your kids and their kids with no worries at all?
If you are able to have a clear view of what you want your retirement to look like, then you should have more focus on how to attain it.
This tool, ‘My Retire Inspired Quotient (R:IQ) by Chris Hogan will be of great help to figure out what exactly would be needed to be saved to secure your retirement.
Second step: Throw In 15% Of Whatever You Earn Into Tax-Advantaged Accounts
Let’s now get your thoughts into action. Invest 15% of your general earnings into your retirement savings.
Follow this guide to begin:
- Grab the 401(k) match
Does your employer, on your contributions, provide a traditional 401(k) with a match? Put at least a full of the match in investment to take advantage of the bonus cash. And if your employer offers a Roth 401(k), with a good mutual fund, invest all your 15% there.
- Open Up A Roth IRA
If you make use of traditional 401(k) and ensure to level up your investment up to the match, bring on a financial advisor who would help in opening a Roth IRA. That’s a retirement savings account which makes you sort taxes on your cash input up front. This in essence means that the increase that occur in your Roth IRA and every other withdrawals you make from age 59½ have no taxes attached. This gives both sides a win!
- Revisit your 401(k).
After you max out on what you give to your Roth IRA in 12 months and you haven’t hit the 15% benchmark, then you should bump up what you contribute to your 401(k) until you are able to hit it.
Prepare your investments evenly in your 401(k) and IRA between 4 different kinds of growth stock mutual funds. These are growth and income, growth, aggressive growth and international. Preferrably, you should consider funds that has over a period of time built a good track record.
Third step: Exceeding 15% —Along With Your 401(k) Max Out Your Other Investing Options
So, now that you are on your highway to building massive wealth for retirement, you should begin to run up the score and get your savings moving fast.
When you are set to make investment exceeding 15% of your earnings towards your retirement, here are options to consider:
a. Peak on your 401(k) and your favoured options on tax. With more funds to put into investment, first peak on your Roth IRA, or 401(k).
b. Get investment in real estate.
c. Open an investment account that is taxable
d. Take good use of your HSA
A study by The Retirement in America revealed that at least 7 out of 10 people who are presently saving for retirement wish they could save more. But why does it seem hard to do? If you want to save more for your retirement, it is definitely attainable, to save more for your retirement, follow the steps here.
1. Reduce Your Regular Expenses
In almost all climes around the world, the regular expenses people incur is one of the top excuse people have for not saving for retirement. And even though household earnings have returned to their initial state before the financial crisis in 2008, the last decade has seen a rise in the cost of living.
But then, this is not a reason why you should not save for retirement. Consider these two tips to keep yourself on track.
a. Invest Your Bonuses.
Several people rather increae their bills to meet up with increase in their earnings. They get a lot of avoidables materials. More expensive wristwatches, a new kitchetn, a fancier car, costlier clothings, and so on. But you should put in mind that investing 15% of your income doesn’t exclude in your extra, bonuses, or any rise on your pay. Those increases in savings will make a huge sense of your nest egg overtime.
b. Commit To A Budget Every Month
If for any reason, you are yet to start budgeting, you really should start now! Budgeting helps you to be incharge of your earnings and graciously guide every dollar. Decide where exactly you want your cash to be spent on instead of muzzing over how all your earnings got spent.
2. Cut Down On Non-Essentials
To start saving, you need to begin to start making bold moves to reduce the amount of cash you pump into stuff that aren’t essential.
Like you should consider cutting out on avoidable subscriptions or memberships. You may want to get the less expensive option on your cable package to save some more cash, and cut down on hanging out for lunch often. Go for the cheaper alternatives to get more funds in your nest egg.
A study revealed that an average American squanders about $1,500 on items that are nonesentials every month. If you put that together for a year, that is a whopping $18,000! And that is suggested to have gone on stuff like magazine subscriptions, eating out, impulse purchase, and more.
The point here isn’t that we have to make our life very difficult to achieve retirement savings, but if we look frankly into our daily lives, we’ll find out that there are a few unnecessary expenses we incur, and can cut down on them without even hurting ourself. For instance, instead of eating out five times a week, you can bring it down to like 3.
Even if you cut out just $150 from $1,500 spent on nonesentials, and put it into savings for a period of 15 years, that would be signficant for your effort. And by doing more assessment of your expenses, you could do more for your retirement.
3. Avoid Debts!
Study by The Retirement in America revealed that about one out of every three people saving for their retirement and are in debt pointed out credit card debt as a major reason they were not able to make more savings for retirement.
Bear in mind that debt is taking from your future. In essence it is not only an act of borrowing money you do not presently have, it is in fact more than just cash. And every dollar that slips away into the payment of debt, would have done much better if saved for retirement.
So, a serious person will knock debt totally out of his life. use the debt snowball method by Dave Ramsey.
Wealthy people understand clearly that debt is burden that draws you back from attaining your financial goals. So, avoid it too.
4. Stay Glued To Goals On Retirement Savings
Your retirement shouldn’t just be about your age, but about your financial figure. Bear that in mind and also know that achieving your financial savings is a marathon, and not a sprint. And this can be achieved with the right plans and attitude towards to the plan. You will be able to enjoy your life now and still be able to secure your future with the progress you make on your financial goals. And yes, you could even exceed that million-dollar mark!