Establishing a robust financial goal like preparing for retirement is a brilliant move. Whether you’re in your 20s or older, it’s never too late or too early to start.
Undoubtedly, saving for retirement can seem an enormous task, especially if you’re starting late. However, you can tackle this effectively by breaking it down into achievable, smaller objectives.
UNDERSTANDING YOUR FINANCIAL STANDING
To successfully save for retirement, it’s crucial to evaluate your current financial situation and recognize where you need to be. If you’re in your 20s, you have time on your side, but it’s far from being a luxury to squander. Ascertain the amount you should dedicate annually to your retirement fund and endeavor to meet this target through personal and employer contributions.
For those past their 50s, ramping up your retirement savings in any way possible becomes a critical necessity. If you’re already maximizing your annual contributions (which have slightly scaled up for 2015), you might want to consider supplemental “catch-up” contributions.
PRIORITIZE RETIREMENT SAVINGS
This specific measure is significant for every age group, especially for individuals from their 40s to 60s who don’t already have a substantial retirement fund saved up. Analyze your spending and determine how you can live modestly so that the surplus capital can be diverted toward retirement resources, investments, and savings.
Potentially, this could involve downsizing to a smaller residence, especially if you have grown children preparing to leave the nest. If your retirement savings are insufficient, then it’s crucial to scrutinize your existing lifestyle and determine what you could go without currently, to ensure a financially secure and comfortable future.
STRIVE TO SAVE 15% OF YOUR INCOME
While saving anything for your future is better than not saving at all, it’s advisable to aim for saving 15% of your annual income.
If you’re just getting started, this target might seem intimidating, but you can gradually work your way towards it. The most straightforward route to reach 15% is by fully capitalizing on the retirement fund contributions from your employer.
Even if your employer matches just 2-3%, remember that it’s still additional funds directed towards your future. Gradually increase your retirement savings by 1-2% annually and adapt to the slight reduction in take-home pay. Often, you won’t even notice this minimal deduction.
To put it in perspective, if you earn $60,000 annually, 1% is only $600, or about $50 monthly. This is a small sacrifice compared to the significant value it can add to your future financial security.
Begin saving for your retirement today, but be realistic about your financial habits. If you’ve missed out on saving for several years, then you have some serious catching up to do to reach your retirement goals. This will only happen if you judiciously manage your budget, channel more funds towards your retirement savings, and invest wisely.
