Even though it’s years away, we will all retire someday. Therefore, saving for retirement is an issue that affects everyone. But if you start asking around, you might find that many people have no idea whether they’re saving enough for retirement. In the worst-case scenarios, they know they aren’t saving enough – or at all! To evaluate your savings plan, ask yourself these questions…
What is your savings rate? You should be able to answer this question off the top of your head. If you don’t know how much you’re setting aside for retirement each pay period, that’s a major red flag.
Are you living below your means? You should aim to live on 85 percent of your income, or less, and save the rest. If you’re living beyond your means, it’s time to cut back and start saving more.
Are you carrying credit card debt? Using a credit card is a smart move that will help you build your credit score. But if you’re carrying high balances for years at a time, you’re living beyond your means, and costing yourself too much money in interest over time. Instead of paying interest, you could be earning interest by contributing more to a retirement account.
How much money will you need to retire? You should be able to answer this question with at least a ballpark estimate. If you don’t have a target savings goal, then you probably don’t have a solid plan for reaching it.
Are you planning on Social Security footing the bill? No one should rely on Social Security to fund their entire retirement (or anywhere close). Remember, the program was designed as a supplement to other retirement income only. It won’t be enough to live on.
Have you ever borrowed from your 401k? Even if you’ve since repaid the money, you can’t really make up for lost time without a very aggressive savings strategy.
Are you taking advantage of all retirement savings perks? If your employer offers matching funds, up to a certain amount, be sure to contribute at least up to that threshold each year. Otherwise you’re turning down free money! Also, since your qualified retirement plan contributions are tax deductible, you want to be sure to claim the full deductible contribution each year. You’ll not only save money for the future; you’ll be saving money on your taxes each year, too.
For more information on saving for retirement, give us a call. We can help you answer these questions, and others, so that you can better prepare for a stable future.