Starting Your Retirement
Saving for Your Retirement: 5 Solid Starts:
Saving for retirement can seem like a daunting task, especially if money is tight to begin with. However, as you’ve probably heard, the earlier you start, the easier it is. So then, it’s no secret that you’re in better shape if you start saving when you’re 24, but that may not be realistic for many of us. The first thing is to not feel overwhelmed; it’s never too late to start! There are a number of strategies that you can use to start saving for your retirement immediately, and we’re going to share our five favorites with you!
- Determine your financial state: First and foremost, you’ve got to know where you sit financially. This means taking an inventory of your entire financial life. For example, do you have outstanding credit card debt? Perhaps a relative left you an inheritance that you have saved. All of these things, as well as a mortgage or loans, will need to be catalogued. From here you can determine the amount of money you’re realistically able to save for retirement each month.
- Take advantage of that 401(k): If your employer offers a 401(k) package, definitely take advantage of it. Once you have your 401(k) setup, you can have a certain percentage pulled from each paycheck and deposited into it automatically. What’s more is that many employers will also offer a matching 401(k) to attract workers. In this scenario, for every dollar that someone puts in to their 401(k), the employer also contributes a dollar, usually capping around 5%. If this is the case for you, you’re poised to see your retirement plan grow greatly, without having to put as much money in.
- Get excited to save: While this may sound like a silly tip, your dedication to saving has a great deal to do with how much you will actually sock away. If you’re not very focused and don’t have your eyes on the prize, the chances are good that you won’t be very motivated. A good way to concentrate on saving is to create small, incremental, attainable goals. These should be realistic but meaningful savings goals, for where you want to be at the end of each month. Also, remember what you’re saving for – to not have to work! Consistently keeping this is mind ought to be a great motivator, even if it is years off in the future.
- Open a Roth IRA: Roth IRA’s are a great alternative to 401(k) retirement plans. However, there is one big difference: with a Roth IRA, you pay taxes on the money when you put it in, and with a 401(k), you pay taxes when you take it out. If you feel comfortable contributing a fair amount of money to your retirement plan, the Roth IRA may be more appropriate. Additionally, you’ll be better setting yourself up for the future as you won’t have to worry about paying taxes when you need the money most.
- Start small: The whole idea of saving for retirement can be quite overwhelming. Instead, start small. Financial advisors recommend that before saving for retirement, folks have six months of living expenses saved. This ought to be a much more reasonable and attainable goal from the outset, as well as providing you confidence in your investing skill. Start by determining your monthly costs for: food, mortgage/rent, utilities, car, and other bills, then multiply by six. Once you’ve got your six months of living expenses saved up, you’ll be well on your way to being a good saver, and already on significantly better financial footing!