Most people plan to save for – or want to save for – retirement. But research shows that many people, including those approaching retirement age, do not have enough savings set aside for retirement.
When it comes to retirement, sometimes it’s difficult to know where to start or what your options are. Let’s explore why it’s important to save for retirement, savings options, and other important considerations.
Retire in comfort.
It’s tempting to let other things take priority over retirement, especially when it feels like it’s a long way off. When you’re young, it’s easy to have a mindset in which retirement seems unimportant. You’re not alone. But when you retire, the last thing that should be on your mind is financial insecurity and the possibility of running out of money. You’ve worked your entire life to get to that point, so you need to set aside enough funds to live comfortably in retirement. Also, you may have big goals on your mind like traveling, which comes with a price tag. Keep reading to learn how to begin saving for retirement.
Depending on your retirement goals, a good rule is to save a minimum of 70% – 80% of your pre-retirement income.
We encourage you to utilize our retirement calculator to estimate your individual savings goal. Once you have an amount in mind, you’ll need to choose your type of retirement account.
Set up employer-sponsored contribution (401k) at your place of work.
Most employers offer to match your retirement contribution, which you should definitely take advantage of if you aren’t already. This is essentially free money coming straight from your employer, making it one of the smartest ways to save for retirement. We recommend setting up automatic contributions that are automatically deducted from your paycheck and deposited straight to your retirement savings. This creates good savings habits because you won’t have to think about contributing after each paycheck. Ask your benefits or HR representative if you’re unsure if they offer a contribution plan and learn more about the options that are available to you.
Don’t rely only on Social Security.
Why not? Social Security should not be your only game plan, and most of the time it doesn’t provide enough to cover all of your retirement expenses. It was designed to supplement retirement income, not replace it. According to the U.S. Census Bureau, today’s retiree gets less than half their income from Social Security – the rest will need to come from your retirement savings.
Increase your contributions incrementally as you get older.
When you’re young, retirement may be that last thing on your mind, but it’s very important to start saving at a young age. Even if it’s not a large amount at first, the power of compounding interest will make a huge difference when you retire. As you get older and your salary increase continue to increase your retirement contributions too and you’ll be on the right path to financial success. Bottom line: The earlier you start to save, the more likely you are to achieve your retirement goals.
Consider investing your money.
Investing can sound scary at first, and most people find it intimidating. That’s completely normal. When you invest money for retirement, that money potentially earns returns. You may end up with more in your retirement fund than if you had simply set the money aside in cash or in a savings account. Learning how to invest the right way can end up making you a considerable amount of savings. You can build a portfolio as conservative, moderate, or as aggressive as you want. As a beginner, plan on starting out with a risk-aversive portfolio and consider talking to an investment advisor or a financial planner for professional advice that aligns with your own goals.