5 Tips to Save for Retirement
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A lot of Americans are living paycheck to paycheck. And when you’re struggling to make it by every month, retirement saving is likely the least of your worries. Or, you are worried about it, but it feels like there’s nothing you can do. We want to help! No matter how early or late you start, any form of retirement saving helps. Opening an IRA or 401(k) are common saving options. But what are some practical steps you can take to reduce retirement saving stress? Follow our credit counselling advice.
5 Steps to Reduce Retirement Saving Stress
1. Start Saving for Retirement Now
No matter your age, if you haven’t started saving for retirement, get started! Even small weekly contributions will make a difference to your bottom line once it’s time to retire. Add a ‘retirement’ section to your budget and evaluate how much you can afford to set aside for your golden years. If you don’t have a budget – start one. There’s no better way to be aware of your income & spending than by using a budget.
2. Set Goals
Check how much money you currently have saved for retirement. Ask yourself at what age do you want to (or will be able to) retire? Where would you like to retire? Will you downsize? How much money do you need to have a comfortable retirement? Are you almost at your goal, or is a significant amount of saving still required? Set SMART goals (Specific, Measurable, Achievable, Relevant, and Timely) to help you make retirement saving more tangible.
3. Do the Math
If you’re worried about not having enough money when you retire, calculate how much your contributions will be worth over time. By the time you are 65 years old, you will have invested $150,000 if you make $5,000 annual contributions to a regular or Roth IRA beginning at age 25. You will have saved about $540,700 for your nest egg when compound interest is taken into account. Create a strategy to raise contributions or extend the investment period after that. Investing consistently over an extended period of time and starting early are the greatest ways to optimise your retirement money, mathematically speaking.
4. Employer Match?
Many employers offer retirement options, making it simple to have money deducted straight through your paycheck and put into retirement savings. See if your job offers an employer match, meaning your employer will match your retirement contributions up to a certain percentage. If they do offer this option, it’s best to maximize the company match. It’s free money! As your income increases, set more aside for retirement.
5. Update your Saving Strategy
Review your 401(k) portfolio and determine the amount of risk you are comfortable taking on for your investment to update your saving plan. Your investment personality may have altered, depending on your age and anticipated retirement age. Since you have less time until retirement, you might wish to contribute to a reduced risk fund to make sure your money is protected in the event that the market declines. Higher risk alternatives could be advantageous if you’re younger because the market has more time to recover from losses. You may want to speak to a financial planner or advisor to choose the best funds for you and your situation. They may also suggest an IRA, or self-directed savings vehicle, which offers a wider variety of mutual funds than a 401(k), including exchange-traded funds and individual stocks and bonds.