Save – Whether you’re still a worker, you just started working or you’re close to quitting your job, it’s never too late to start saving for retirement. There are different excuses why you shouldn’t save for retirement and they all sound good but you should know that saving for retirement is not a task, it is a necessity especially if you don’t want to depend on people after retirement, you want to live a happy and easier life and you don’t want to rely on social security benefits after retirement.
Saving for retirement can be very tricky. It is one of the biggest financial challenges but it has other benefits too. In Fact the best time to start saving for retirement is when you’re in your 20’s because you have fewer needs and more wants and also having a longer horizon gives compound interest more time to work. It also helps you have a solid financial life.
For example, if you save $100 in a year and you keep adding $20 to it every year, the compound interest keeps increasing until you’re ready for retirement and by the time you’re in your 50’s you already have more than $1000 saved. To avoid spending too much in your 20’s and rather save more, check if you do more of impromptu spending than planned spending and also if you spend more on your wants than your needs.
Most times you don’t need that new pair of shoes or that video game player so focus more on your needs instead. You can focus more on your needs than wants and still be a sophisticated minimalist in your 20’s. According to Investopedia, you might not think that saving a few bucks here and there in your 20s means much, but the power of compounding will make it worth much more by the time you need it.
Money plays a pivotal role in every area of your life especially when you start paying for expenses so saving for retirement should be a top priority. In most cases,it could be a difficult feat to achieve especially if you have too many bills to pay but it is the best move anyone can make to avoid money problems in the future. If you are thinking of the best time to start saving for retirement then the best time is now, and if you don’t have an idea of the best way to save for retirement then you should consider using the following tips.
Start Saving Early And Set Budget Goals
Saving for retirement early for a long time in small amounts can bring massive results in the future rather than saving in large amounts for a short time. The truth is the earlier you start, the better off you will be in the future, but even if you start saving late, it is important to know that there are still certain steps you can take to increase your savings.
Decide on a particular amount to save every week or month and work towards it. You can have a budget by writing down how much you spend in a day if you spend money on necessary things or unnecessary things. How many transactions do you do in a day and on what? Focus more on your needs than your wants and make retirement saving a high priority. Saving for retirement starts with thinking about your budget goals and how long you have to meet them, especially if you want to have a comfortable, secure and fun retirement.
Understand Your Time Horizon
Your current age should decide on your retirement strategy. The longer the time, the higher the risk your retirement plan can withstand. If you are younger or in your 20’s and 30’s, the majority of your savings should be in investments or in stocks and if you are older, your retirement savings should depend on your income and how to preserve your capital.
Know Your Retirement Needs
Retirement is expensive because you need more money to spend and still maintain your cost of living when you stop working. To calculate and know what your retirement needs will be and save alongside your calculations. As a retiree, you no longer have to work 9-5 instead more of your time and money will be spent on travelling, sightseeing, shopping and other expensive activities so having an accurate calculation of what your retirement expenses will be is important because it will affect how much you spend as a worker and how much you invest and help you not to outlast your savings.
Know Your Employer’s Pension Plan
Find out if your employer has a pension plan for his workers, and also if you have benefited from your past employment. Don’t retire or change jobs without finding out what will happen to your pension or if you are even entitled to a pension. If your employer doesn’t offer a retirement plan or pension, request that he starts one.
Contribute Towards A Tax-Sheltered Saving Plan
Contribute towards a tax-sheltered saving plan if your employer offers one. For example, 401(k) gives you a break on taxes from the money you contribute. Sign up and contribute to it. It will help lower your taxes and your company could add more towards it.
If your employer offers 401(k),403(b) or 457, and you are not already contributing towards it, now is a good time to start because such plans are automatic investments and you will also be able to defer taxes on that income until you withdraw during retirement.
Open An IRA
If you don’t have a 401(k) plan or any similar plan, then you should consider opening an Investment, Retirement Account to help contribute to your retirement plan. There are two options to choose from if you want to open an IRA;
You can choose a traditional IRA depending on your income or if you have a good retirement plan. Contributing towards IRA may be tax-deductible and your investment earnings have the opportunity to grow tax-deferred until you make a withdrawal.
A Roth IRA could be the best option for you if you meet the limits based on your federal tax filing status. Remember the after-tax value of your withdrawal will depend on the type of IRA you choose.
Consider Other Investments
According to Investopedia, you should think of an investment portfolio as a basket that holds all of the investments you have in your various retirement and non-retirement (taxable) accounts because your portfolio grows with you and provides the income you need to live out your post-work years in comfort. Determine how to share your investments among different kinds of assets, stocks, because it could be a powerful way to keep your investments growing.
Avoid Emotional Investing
Sometimes our emotions follow the way we invest. For example, when an investment market is doing pretty well, we tend to put most of our money into it. When the market comes down, we withdraw our money and miss out on profits when it goes up again.
Don’t Touch Retirement Savings
Sometimes you might be tempted to touch a little money from your retirement savings, especially if you are now in your 50’s when you can make penalty withdrawals from your retirement plans and IRA. Just because you can make withdrawals doesn’t mean you should, even though you really need the money except for life-saving related issues. The longer you leave your retirement savings, the bigger and better it will be.
Unexpected events can still occur even if you have good retirement savings or investments. You could have a car accident, or your health could deteriorate or your home could be damaged. This is why you need to protect yourself and plan for the future by having health, car, house or other insurance plans whether it is long term coverage or life policy insurance.
Be Ready for Unplanned Retirement
According to ERI, nearly half of retirees left the workforce before they planned to and the COVID 19 pandemic contributed towards it. This is why you should start making retirement plans, especially if you are in your 50’s or 60’s.
Pay Off Your Debts Before Retirement
The best time to pay your debts is while you’re still working to avoid touching your retirement savings. It is much easier to pay up your debt from your income than paying from your investments so pay up your debts while you’re still working and enjoy your savings when you’re retired.
Consider having Work From Home Jobs
Having side jobs will help cover some of your expenses if you’re saving towards retirement and you don’t want to depend on your income. Whether it is freelancing or managing social media platforms for people or web designing, a side job helps you with the extra cash you can put into your retirement savings and the best thing about side jobs is you can still do them after retirement.
Get Professional Help And Ask Questions
When it comes to making decisions concerning retirement plans you should seek the help of a financial advisor. Many financial companies offer programs on how to save for retirement so you don’t have to do it on your own.
Given the trends of longevity, income inequality, and retirement savings rates among millennials, it is more important than ever to make sure you are making sound decisions when it comes to your future.
The best way to save for retirement may not be what you think – in fact, one study found that people who contribute 10% or less of their earnings are actually better off financially in the long run. But how much should you really be saving?
What can you do if your company doesn’t offer a 401k match? How will Social Security changes affect your plans? These questions don’t have easy answers, but we hope these few tips help get started on creating goals based on where YOU want to end up.