Three Ways to Start Saving for Retirement This Month
Earlier in the month we celebrated National Save for Retirement Week. That means it’s a good week to touch on the kinds of concerns faced by people who are two or more decades away from retiring. Why? Well, because they have a lot of time to get ready for retirement—and they need to learn not to waste it.
Time: Both an Enemy and Friend to Retirement Planning
When you think about the growth of retirement savings, time is a benefit. The more time you have to save, the more time you have to compound your earnings and recover from downward market spirals. But time is also a tricky element, fooling people into thinking they don’t need to start planning now—they can always get started next year. The problem with this line of thinking is that the later you start, the less you will save and the less you will earn on those savings. Losing the advantage of time in your retirement savings can be devastating to your ability to finally retire with some level of comfort.
Three Ways to Start Saving Today
To turn all this around—to start saving for retirement now and gain better control over your future—all you need to do is follow these three steps.
- Opt into your employer-sponsored retirement plan. If your employer offers a 401(k) or any other kind of retirement plan, you need to opt in immediately. If there’s an employer match you can essentially get free money when you opt in and start contributing. If there isn’t, you can still take advantage of compounding and tax savings.
- Open an IRA. An IRA is an individual retirement account. With one, individuals under 50 can contribute up to $5,500 (in 2016) per year. Not only do these contributions add up but they can also create tax benefits for you and earn money once they’re invested within the IRA.
- Create a new budget. Opening retirement accounts is all well and good but if you can’t find room in your budget for added savings contributions then they won’t help you when it’s time to hang up your career and retire. Rework your budget so that you have the ability to save in these accounts and remember that the sacrifices you make today will help create income for tomorrow.
During retirement, you may spend decades trying to support yourself with no income other than Social Security. By saving for retirement now—as early as you possibly can—you are helping ensure your future comfort, satisfaction and safety.