Ask one hundred people about their retirement plans, and you might receive one hundred different answers. Dig a little deeper, though, and you’ll see that most answers fall into a few basic categories: Those who are confident about their retirement savings, those who know they need to be saving more, and those who haven’t saved anything at all.
If you fall into either of those last two categories, these tips are for you. And even if you’re feeling okay about your rate of savings, it wouldn’t hurt to review your plans and try to save a bit more.
Budget for savings. It’s difficult to meet a goal that you haven’t even set! Saving for retirement needs to be a top priority, not an afterthought once you’ve spent most of your paychecks. Decide upon the amount you need to be saving for retirement, and stash that money first, each and every payday. Then, arrange your budget around what’s left over.
Make it automatic. The easiest way to pursue a regular savings plan is to set up automatic contributions to your savings vehicle. The money is taken from your paychecks and sent directly to your retirement savings account, so that you’re never tempted to spend the money and make up for it later. It’s also one less thing to worry about each month.
Put your money to work. Setting aside part of each paycheck is only the first step to building a nest egg. It’s great to become a diligent saver, but don’t overlook the opportunity to grow your money even more. Consider this: Setting aside 200 dollars per month for 40 years, and earning a 1 percent rate of return on the money, will net you about 118,000 dollars for retirement. Meanwhile, earning an average rate of 8 percent on that money will turn it into about 700,000 dollars (keep in mind that these figures represent fictional scenarios, for illustrative purposes, and that interest rates do change over time).
Learn your options. Speaking of putting that money to work, make sure you know all of your retirement savings options. A 401k plan is a common option, and offers certain tax incentives, whereas a Roth IRA comes with very different benefits. It’s important to learn how different retirement savings accounts work, and how they fit into your overall, long term plan.
On that note, give us a call. We can explain all of the options available to you, and help you decide how to proceed with your retirement savings plan.