There’s a lot of talk about retirement planning these days. But what does it mean to you? If you’re in your 20s, 30s or 40s, retirement is just one more thing on your to-do list — right after paying the bills and getting the kids to soccer practice. However, retirement planning is one of the most important and most difficult financial goals you can have.
According to Statista, 66% of U.S employees have savings in bank accounts—and that’s just for those who are saving for retirement at all.
The truth is that many Americans aren’t ready for retirement. In fact, a recent study found that 56% of workers cannot even cover a $1,000 emergency expense with savings. That means most of us aren’t where we want to be financially.
But it’s not too late to turn things around. You can start saving right now for retirement—and this article offers 11 easy ways to do it.
1. Set a Goal
The first step toward saving money is setting a goal — preferably one that will make you feel like you have plenty of money come retirement time. For example, if $500 per month doesn’t seem attainable today, consider increasing your savings rate by 1% every year until you reach the point where your goal feels more attainable.
2. Start Small Today
Retirement doesn’t come cheap. According to CNBC, the average 65-year-old couple retiring today will need over $315,000 in retirement income just to cover their medical expenses. But if you start saving early, that can become manageable. The earlier you start saving, the more time your money will have to grow and compound. This means that even if you put away a small amount each month, it could make a massive difference over time.
3. Set up Automatic Savings
One of the easiest ways to save for your retirement is to set up an automatic savings plan so that money is taken directly out of your paycheck and deposited into an IRA or 401(k) plan every month.
You can also set up automatic transfers from checking accounts to ensure you don’t spend it on other things first. This way, even if you don’t have the willpower or the interest to save for retirement on your own, it will still happen—automatically.
4. Consider Tax-Advantaged Accounts
Tax-deferred retirement accounts like 401(k)s, 403(b)s and traditional IRAs are always an excellent place to begin saving for retirement. The money you contribute will grow tax-free until it’s withdrawn — usually after age 59½ when you start taking distributions from these accounts.
These accounts can be a great way to shelter your savings from taxes now while giving them time to grow without being touched by Uncle Sam.
5. Always Max out your Employer Match
Many employers offer matching contributions to their employees’ 401(k) plans. This means that if you contribute a certain amount to your 401(k), your employer will match your contribution up to a certain percentage — often 6% or more.
The money comes from your paycheck before taxes and is invested in stocks and bonds. If your employer offers an employer match, take advantage of it. If you can afford it, contribute enough money so that the match will be applied to all of your contributions each year. That way, you’ll get an immediate return on investment without having to invest more money later on.
6. Save More than you Think you Need
If you’re in your 20s or 30s and just starting out, it’s tempting to think that retirement is decades away. But the earlier you start saving for retirement, the more money will have time to grow in the stock market.
So even if it feels like you’ll never have enough money to retire, it’s essential to set aside as much as possible — even if it means cutting back on nonessential expenses such as eating out.
7. Rebalance your Portfolio Regularly
Rebalancing is integral to investing because it helps keep you from getting stuck in certain asset classes or sectors while they fall out of favor with the market.
For example, suppose you’ve invested heavily in stocks over the past several years and want to take some risk off the table; consider selling some stocks and buying bonds instead. This will lower your overall risk profile (and possibly even increase returns). You should check in with your portfolio once or twice a year and rebalance as needed.
8. Consider Starting an IRA or Roth IRA
Many people think IRAs are only for people who don’t have access to a 401(k), but they’re available to everyone. Both traditional IRAs and Roth IRAs offer tax advantages. With a Roth IRA, you pay taxes on contributions upfront but don’t have to worry about paying taxes on withdrawals once you reach age 59½ or older, provided that your total yearly distributions from all sources don’t exceed $10,000 per year.
You can also withdraw any contributions at any time without penalty as long as it’s been at least five years since you made those contributions (although if you do so within five years of making them, you’ll have to pay taxes on those withdrawals).
9. Invest in Low-Cost Index Funds or Exchange-Traded funds (ETFs)
Investing in mutual funds can be a smart way to save for retirement. But not all mutual funds are created equal. Some have high fees and lousy performance, while others charge little or nothing in fees and have great returns.
In general, index funds are better than actively managed mutual funds because they track an entire market — such as the Standard & Poor’s 500-stock index — instead of trying to pick stocks that will outperform the market as a whole.
10. Consider Delaying Social Security as you get Closer to Retirement
If you’re married and both spouses are eligible for benefits, one of them should delay taking Social Security until age 70 — even if they’re already receiving benefits. This will increase their monthly income by 8% to 10% per year they delay taking benefits after full retirement age (FRA).
Of course, if one spouse dies before reaching FRA, the survivor would likely be better off receiving benefits at FRA instead of waiting until 70. However, doing so may mean forfeiting part of their survivor benefit later.
11. Pay off High-Interest Debt First
Paying down your credit card or car loan will lower your monthly expenses and free up more cash for retirement savings. In fact, paying off a credit card with an 18% interest rate can save you more than $20,000 in interest over five years if you’re paying $500 a month.
The Bottom Line
As this post has hopefully shown, there are many ways you can begin saving for retirement today. No matter your income or age, you can get started putting a small amount of money away each paycheck, which will make a big difference over time.
Saving for retirement doesn’t have to be hard—it’s just about being smart and deciding to start saving.
Related: What Age Is Retirement For Social Security Benefits?
