A lot of people understand how to save for a car or a new house. It is pretty straightforward to budget for something with a fixed price tag. Where some people miss the mark is saving for retirement. For some people, this is a nebulous concept that they just can’t pin down.
It doesn’t take a lot of math skills to figure out how much money a person or family spends – especially in this time of credit cards and online banking.
Knowing how much goes to fixed expenses such as housing, food, transportation, and medical needs in a year can usually be determined with a few clicks of a mouse.
Once this amount is determined, it needs to be multiplied by the number of years you plan to retire. This is not as difficult as some might think! Start with your planned retirement age and add your number of years of retirement. Take a look at the life and health of your parents as a starting place for this calculation.
Use your best judgment to come up with a number. If you plan to retire at 65 and your parents are well into their nineties, you can plan for at least 30 years of retirement. To be safe, plan for 40 years.
If you plan a change in lifestyle in retirement, such as extensive traveling or another costly hobby, think about how much you would plan to spend on this. This may be offset by things you no longer plan to do, like commute to work, purchase business attire or any other major expense you had while working. Add this number to your fixed expenses.
Take your spending needs and multiply that by the number of years and you will have a ballpark number of what you need to have saved for your retirement.
You may find that number is now a million dollars or more. Don’t panic. With a properly managed retirement fund, this may still be possible.
Here are some ways to help you save for retirement.
The most important activity is to budget. Figure out how much you make pre-retirement. Track all spending. Figure out where you are at the end of each month for a few months. If you are just making it through, or owe money at the end of the month, trim unnecessary spending and save to your designated retirement accounts at the start of every month. No excuses! This forces you to save before you spend, instead of saving what’s left over.
Here are seven ways to make this possible
If you plan a change in lifestyle in retirement, such as extensive traveling or another costly hobby, think about how much you would plan to spend on this. This may be offset by things you no longer plan to do, like commute to work, purchase business attire or any other major expense you had while working. Add this number to your fixed expenses.
Take your spending needs and multiply that by the number of years and you will have a ballpark number of what you need to have saved for your retirement.
You may find that number is now a million dollars or more. Don’t panic. With a properly managed retirement fund, this may still be possible.
Here are some ways to help you save for retirement.
7 Ways To Save For A Comfortable Retirement
The most important activity is to budget. Figure out how much you make pre-retirement. Track all spending. Figure out where you are at the end of each month for a few months. If you are just making it through, or owe money at the end of the month, trim unnecessary spending and save to your designated retirement accounts at the start of every month. No excuses! This forces you to save before you spend, instead of saving what’s left over.
Here are seven ways to make this possible
1 Live Below your Means
Living with less will simplify your life and help you save more money. Give up the craziness of always having to have the latest gadget. If something is still functional, wait to upgrade. Don’t just coast on autopilot.
Think about those things you truly look forward to and eliminate anything you do out of habit. Do you go to the movies or a restaurant every week, just because you always have? Do you actually enjoy what you are eating/seeing?
It may be time to be more selective about your activities. This may even make them more enjoyable! In addition, spending less on things and nights out will give you more to put away for retirement.
2 Live Debt Free
Debt is one of the curses of our time. I often say that borrowing now is robbing the future. Some people think that debt is harmless, or a necessity of modern life. Stop to consider how much you are paying in interest every year and think of how much more money you would have to invest without debt! Make paying off debt a priority. By getting rid of lingering debts and those high-interest payments, you can put more money aside for retirement.
3 Use Investing Apps
If you are struggling to save, consider using apps to simplify saving
4 Have Emergency Funds
An emergency fund is an important step for your retirement saving process. It keeps you on track with your retirements savings in the event you have some unexpected expense, such as an unexpected home repair or other emergencies. This will keep you from needing to use credit and start paying high-interest rates all over again!
6 Start Early, Or Add More
It’s never too early to start saving – especially for retirement. The more you deposit into your retirement fund now, the longer the funds will accrue interest. Interest compounding is the financial magic that will help you reach your savings goal!
If you weren’t able to save in your early working years and are looking at low retirement savings, you can still make up for lost time. If you are 50 or older, you are entitled to a catch-up contribution. For an IRA, this is an extra $1,000 per year. For a 401(k), this is an extra $6,000 per year.
6 Maximize Your Employer Plan
If you are fortunate enough to have an employer that offers a retirement plan, take full advantage of it! If they offer a match, do whatever you need to do to get that match. This is free money and nothing else is as important as that! Increase the percentage you save every few months or every year. Do what you must to maximize your contributions.
7 Save And Invest With A Roth IRA
If you maxed out your employer plan contributions and can still afford to contribute more, use a Roth IRA. There is, however, an income cap. If you make too much you won’t be eligible to contribute. The advantage of a Roth IRA is that you may use the funds to finance other investments such as real estate investments or mortgage notes. This is where you can rapidly accelerate your retirement funds.
There are a lot of ways, with awareness and a little effort, that you can take charge of your retirement fund. adopting a budget, eliminating debt – especially high-interest debt, and limiting spending are great strategies in this process. Free up all the money possible to set aside for retirement.
There are a number of retirement savings vehicles and investment products to help you. Real estate is by far the best option as it is tangible real property and relatively low risk. There are many investment models to suit any risk tolerance and involvement level.
There are options!
Knowledge is power and updated knowledge is the most powerful of all.
It takes discipline, but living within one’s means is key to accumulating wealth. Being financially responsible in the present is a good way to ensure a comfortable future.
These steps are good places to start a more conscious and directed route to achieving your financial freedom. Read, reflect and take what will work for you.
It takes discipline, but living within one’s means is key to accumulating wealth. Being financially responsible in the present is a good way to ensure a comfortable future.
These steps are good places to start a more conscious and directed route to achieving your financial freedom. Read, reflect and take what will work for you.
Bottom line is that there is no blanket strategy. Each person must evaluate their own circumstances, needs, and desires. Get the help you need to achieve financial freedom.
If you don't design your own life plan, chances are you'll fall into someone else's plan. And guess what they have planned for you? Not much.
-Jim Rohn
Above all, believe in yourself and believe that you will achieve your goal!
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Sources:
Lynda at Sonoran Sun | Private Equity Investments
Further Reading:
