Take a look at your savings. How confident do you feel that your savings will enable you to have the retirement you want?
“We are living longer,” says Reid Abedeen, an investment advisor and partner at Safeguard Investment Group. “Retirement now is considered 20 to 30 years of unemployment, so all the money you build up has to last that time. This is a big challenge americans are going to face in the future.”
Even if you have no savings, now is the time to get a jump-start on your retirement planning.
Here’s how:
Find Out How Much You Need for Retirement!
Saving every month is hard. But it is harder when you don’t actually know if you are saving too little or too much.
No matter whether you are 25, 45, 55 or 65, it is important to know how much you need for retirement.
The answer is not simple to figure out on your own –-it is all dependent on your responses to 20 to 30 different questions. Each answer can significantly change how much you need.
Financial tools can help you predict and calculate how much you might need during retirement. Using some online tools can help keep you set up a savings plan or to keep you on track for your retirement goals. Don’t have any retirement goals? Planning tools can also help you figure out what you want out of retirement and help you plan.
“Research and software that can calculate how much money will compound over a period of years can help with the motivation for a person to start saving,” says Abedeen, who advises people to use online resources and financial advisors to get savings goals on track. “Tools also help minimize spending which allows [you] to be successful in the long run.”
The NewRetirement Retirement Calculator can tell you how much you need. Plus give you tools for tracking your progress and discovering ways to improve your financial profile.
Pay Yourself First
While there’s no magic number for everyone, you should save a portion of every paycheck and make paying yourself a priority. Even if it’s just a small amount, paying yourself first will have big benefits later. If you’re able to save more as you get older, continue increasing the portion that you put into savings every week or month.
“Have a purpose for each portion of your paycheck,” says Abedeen. “People should really focus on putting aside 5% to 10% of their paycheck every week or every other week and let it compound.”
Don’t forget to increase this amount whenever you get a raise. When you’re closer to retirement, continue boosting these savings as much as you can.
Start Early
Kicking off a retirement fund or savings account as soon as you can will help your money grow more over time thanks to compound interest. Even saving a small amount like $25 or $50 a month will really add up over time, says Abedeen. Start saving when you’re young to take advantage of compound interest.
If you feel like you aren’t able to save any money month to month, try making a budget. Write out your expenses for each month and see how much you can set aside. Budgeting can also help you better plan what you will spend money on and you may end up finding a little wiggle room for more savings.
“Have a sit down and look at your expenses and see where you can cut certain expenses down,” Abedeen advises. “With that amount that is able to be cut, people should really be focused and committed to save that amount every week or every month.”
Utilize Your Benefits
Does your employer offer a sponsored retirement plan? Check out your benefits to find out. Most Americans are not utilizing an employer-sponsored retirement fund, according to a report from the Schwartz Center for Economic Policy.
In 2011, 68% of the working age population between the ages of 25 and 64 did not participate in an employer-sponsored retirement plan. If this option is available to you, consider investing in the plan right away to take advantage of additional resources like employer matching. If you’re not participating in an employer-sponsored plan like a 401(k), you’re likely leaving money on the table.
“Not only should you take advantage of it every year, most employer plans do some amount of matching, so it’s free money for you,” says Abedeen. “Even if it’s 3% [matched], it’s free money. You should take advantage of it so you don’t have to work into your 70s or 80s.”
Consider Tax-Free Vehicles
There are many ways you can save, but not all are equal. Your employer 401(k) also comes with tax benefits, but there may be contribution limits and not all employers offer sponsored plans. Some retirement planning options, like an Individual Retirement Account (IRA) or Roth IRA can offer tax-free incentives, which means saving through this financial vehicle can help you get the most out of your money.
“A Roth IRA is the most efficient manner to work with because regardless of increases in taxes, the investor is shielded from any additional taxes in the future,” says Abedeen. “If [you] are not qualified for a Roth or if you are younger, you can look into a life insurance policy with a loan provision to the policy that you can take the money out tax-free. they can buy a guaranteed policy that can grow tax-free.
If you participate in an employer-sponsored retirement plan and you’re able to save more, supplemental tax-free funds are worth considering to maximize savings.
“This is not a one or the other,” Abedeen advises. “[You] can do both.”
