On being burdened with fixed monthly costs and other expenses such as student loan or purchase of car, postponing the monthly savings for retirement can be tempting. However, the longer you postpone planning for your golden years, the more difficult it will be for you later on to accumulate sufficient funds for the latter part of your life. The good news is that you can start saving without feeling cash-strapped or without making any lifestyle adjustments.
You can lead a comfortable retirement life, irrespective of the size of your paycheck. Here is what you need to do in order to save for the period after your professional life comes to an end:
The best day to start saving is today, even if you can save only a little bit. There is a good reason behind starting young as it helps you leverage the magic of compounding. Though it’s difficult to save, but the urge to do the same grows as you see your account balance growing.
Set Up Automatic Contributions
It’s always better to automate your retirement savings — meaning a fixed portion of your salary goes directly to a retirement account such as a 401(k), Roth IRA or traditional IRA. Ideally, you should save at least 5-10 percent of your pre-tax salary, make do with the reduced amount and adjust your lifestyle accordingly.
Take Advantage of Your Company Match
In case your company offers a 401(k) match, just grab it. This is essentially free money since your company matches the amount that you commit to put toward your 401(k) up to a fixed limit. This way you’ll be able to accumulate a huge sum by the time you retire.
Bank Any Surplus Money
Whenever you receive some cash gift such as performance bonus, birthday check or any other present in monetary form, instead of spending it on a new pair of trousers or a vacation, it will be better if you save the thing instead. Better forego the urge to spend the surplus money for short-term pleasure for the sake of a better future.
Take Advantage of Catch-Up Contributions
Catch-up contributions are especially useful if your age is above 50 years. It allows you to compensate if you did not start saving in the early stage of your career. You can aim to increase your retirement contributions up to the maximum limit allowed in your 401(k), IRA or other retirement plans. So, all is not lost if you realize the importance of retirement savings.
Set a Goal
There should be absolute clarity on how much you’ll actually need by the time you retire. This will make the process of saving easier. We, therefore, advise you to set a fixed goal and pursue it relentlessly. You can use various retirement calculators to determine at what age you want to retire and how much amount you’ll need to save every month to reach your goal.
Retirement is an inevitable outcome of your life, and you’ll need to plan for it in order to lead a comfortable life. So, you need to take it bit seriously. Whether you have started your career or are in the midway stage, the above tips should help you in achieving your objective.
How do you plan to save for life post-retirement? Share your views via tweet @0PointLoan.