Saving for retirement is a popular subject of money sites, but the average person does not spend a lot of time thinking about it. It is essential to plan your retirement fund whether you are 21 or 61. It can be easy to push off retirement savings saying, “I’m too young; I’ve got plenty of time” or “I am too old to save anything good”. Both cases are untrue, and it really is never too early or too late to start your retirement funding.
Obviously, earlier is better to start saving for your retirement. If you are fresh out of college, this advice still applies to you; so don’t ignore it. The best way to supercharge your retirement savings is to take advantage of employer 401K matching. Sign up for this benefit as soon as you enter a new company because it is essentially free money, and it will motivate you to contribute to your 401K. Many 20-somethings will land a good job and not take advantage of this benefit because it means you have less to spend each year. If you have your contributions taken out automatically before you get your paycheck, you most likely will not even notice that money is gone. Yes, you may have to adjust your lifestyle to accommodate, but the pay off when you hit retirement age will be worth it. Just start with 1% of your income and try to increase it 1% each year if your budget allows.
Catching Up When You Are Older
If you are getting into the retirement game late, know that you are not alone. While you will have to contribute more to your retirement fund than a 25-year old, it is not impossible. The first thing to do is to ensure you are making the maximum contributions you can. Thankfully those over 50 can can contribute $23,000 to their 401K and $6.500 to their IRA a year. Take advantage of these numbers and pair them with employer matching. To reach these big numbers each year, you are going to have to cut back on your living expenses. This may mean moving to a smaller home, downsizing your car, or more. For most people aged 40-55, their kids are grown and are starting to branch out on their own, if they haven’t already. It is very important that your kids know you aren’t a bank account and that you have to save as much as you can for your retirement, or else, your son and daughter will be stuck with the bill when you are too old to work. Your children may be upset that you are not going to help them pay for college or help them buy their first home, but you are giving them a much better gift by taking care of yourself through padding your retirement fund.
Advice for All Ages
No matter how old you are when you start saving for retirement, it is essential to know how much you are going to need. Calculate expected living costs as well as costs for emergencies and insurance. Once you have your number, that should be your goal retirement savings.
Another tip for everyone is to put contribute half of your raise check or tax return to your 401K or IRA account. This can help you painlessly hit those maximum contributions.
Don’t let your retirement take the back burner anymore. Make a plan today that will allow you to have a financially secure retirement instead of one living off of government assistance and handouts.