Thinking about retirement savings? Worried you’ve waited too long? Wondering how you will possibly have the funds to retire comfortably while still maintaining your current quality of life? Planning for retirement can be a daunting task, but it’s absolutely essential to start now, regardless of your current financial situation or age.
According to the 2020 Survey of Household Economics and Decisionmaking (SHED), more than one-third of non-retired individuals felt their retirement savings weren’t where they needed to be. If you’re among them, you’re not alone. The good news is it’s never too late to start saving for retirement. Whether you’re just entering the workforce or planning to retire soon, these tips will help you get started saving for retirement today.
1. Set a Retirement Savings Goal
The first step in saving for retirement is setting a realistic goal. After all, you still need to pay your bills and handle expenses for yourself (and possibly your family) while you’re bringing home an income. A common barrier to setting a retirement goal is the misconception that it will not be enough or will too greatly reduce your net pay. The truth is, even setting aside 1% (almost always pre-tax) is better than nothing. Keep in mind that goals can and should be adjusted as circumstances change. You simply need a general goal to get started.
2. Speak with a Financial Advisor
Coming up with a realistic goal that works for you is overwhelming. Let’s face it: we’re not all financial geniuses. That’s why it’s best to work with a financial advisor who understands the ins and outs of retirement planning and will factor your unique situation into the equation. This takes much of the guesswork out of saving for retirement while fast-tracking your way to actually putting money away for the future. Consider the following resources you may already have free access to:
- Your bank or credit union financial advising team
- Your retirement plan’s advisors and tools
- Free retirement planning calculators, such as the FINRA Retirement Calculator
3. Create Separate Funds for Emergencies & Medical Expenses
The 2022 Retirement Confidence Survey (RCS), jointly conducted by the Employee Benefit Research Institute and Greenwald Research, provided insight into how respondents feel about their retirement choices, options and current status. Notably, the RCS found that 40% of workers listed paying off debt as a barrier to saving for retirement. Contributing income to an emergency fund and medical expense account, such as an HSA, can offset costs that may otherwise end up on credit cards.
4. Contribute to Your Employer’s Retirement Plan
Many employers offer a 401(k) or 403(b) as part of their benefits package. These types of retirement accounts offer the benefit of tax-deferred contributions and generally steady growth through investments. You can be as hands-on or hands-off as you’d like to be with your investment decisions, as the financial management companies managing the plans will generate an investment portfolio for you. Even if you’re self-employed, there are options such as a solo 401(k), IRA or Simplified Employee Pension that will allow you to save for retirement.
5. Take Advantage of Employer Matches
Should your employer offer a retirement plan, they may also offer matching. Matching allows you to potentially double the amount you’re investing in retirement without contributing any additional income. It’s a great way to boost your retirement savings without missing out on any of your hard-earned dollars. So what’s the catch? You often need to invest a minimum percentage to enjoy the matching benefits. For many workers, the minimum contribution is 5% or under.
6. Increase Retirement Contributions by 1% Annually
Even if you need to start small with your retirement contributions, you don’t need to keep investing the bare minimum. If you make a resolution to increase your retirement savings by 1% annually, you effectively enhance your contributions without taking too much of a hit in your paycheck. This is a great way to move toward your retirement goal.
7. Trim Your Expenses
If you’re looking at your budget and trying to determine what you can save for retirement, start by trimming your expenses. This could be anything from curbing online spending to trading your morning to-go coffee for a homemade cup of joe. For example, the $5 you may spend on coffee each morning before work amounts to $100 a month. Making coffee at home would cost just a few cents (and the price of a good, reusable to-go cup). The result would be more than $1,000 a year that could be added to your retirement account.
8. Reallocate Funds to Your Retirement Plan
In life, nothing stays the same. As your financial situation improves from paying off debt or eliminating home and auto loans, use that additional money to pad your retirement savings account. Even a 1% or 2% increase in contributions can help you earn maximum employer matching and amount to thousands extra in your account once it’s time to retire. Additionally, take advantage of any bonuses or raises you earn as an opportunity to increase your retirement contributions.
9. Consider Catch-Up Contributions
Life happens, and things don’t always work out the way we planned. If you’re over 50 and find your retirement account isn’t as healthy as you’d like it to be, consider making catch-up contributions. The IRS allows you to invest more than the annual limit once you’re within reach of retirement age. This can amount to thousands more in your retirement account annually. It’s best to check with your retirement plan’s managing company to verify what your annual limit is based on your type of plan.
The Time to Plan for Retirement is Now
Regardless of your situation, it’s never too late to start planning for the future. Use some or all of these tips to jump-start your retirement account so that you can spend your time enjoying retirement instead of worrying about funding it.
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