RETIREMENT
Retirement
Retirement: Saving Money
Planning for retirement is a complex process that evolves over time. To live a comfortable and happy life after retirement, you'll need to develop a financial cushion. The planning phase of retirement is the most critical phase towards which you can devote your time and efforts.
In the financial industry, an established benchmark to work towards achieving financial stability is to save approximately 70% of your earnings. To ensure a comfortable lifestyle in retirement, you'll want to begin building your savings at the start of your career. Additionally, it will be important to create a plan for key life events that are either anticipated or unanticipated. It is important to consider inflation to account for volatility and change over time.
Why You Should Save for Retirement
- You are establishing a financial footprint for your family. Saving will help your children and future generations understand the importance of saving earlier, and they’ll also learn the basics of understanding and handling finances.
- You are avoiding becoming a burden for your children.
- You may live longer than anticipated in your retirement. And if you do, you may run out of cash.
- Your social security benefits may be insufficient, and it may not meet all your retirement expenses.
When Is the Right Time to Start Saving for Retirement?
The trick is to start early on. The moment you secure a job or open a business, you'll want to start saving for your retirement. Each year's earnings can produce their profits the following year – a great wealth-creation phenomenon called "compounding."
For a lot of people, making $1 million might seem like an unachievable goal. But you only need to understand the secret. And the secret is time. You only need to save a little money – made consistently over time– to make a lot of money.
For example, to attain $1 Million dollars, you'd only need to save $2125/month. While doing so, you save roughly $25,500 each year over a (typical) 40-year career. By the time retirement rolls around, you will be a millionaire. So, start now and watch your savings grow with time!
How to Save for Retirement
Becoming a saver or investor can be challenging for most people, but it doesn't have to be. The ideal way to save is to use your retirement savings accounts.
Here are some tips to save for retirement...
First, start a retirement fund. If your firm gives a sponsored retirement plan, like the 401(k), send your first proceeds into the account until you get the complete match. If your company doesn't offer a workplace retirement plan or if the plan doesn't include matching contributions, begin with step 2.
Second, contribute to an individual retirement account (IRA) for saving about $7,000 yearly to an IRA. Putting money into an IRA reduces the tax bill for that year; it can grow tax-free for years.
If you max out the individual retirement account, go back to the 401(k) or any other plan and continue saving money there.
Final Thoughts
Remember, determine your savings plan on what satisfies your needs. Remain consistent in achieving your goal. It needs to be a constant, long-term habit.
If you save money monthly, make sure you save your money wisely and patiently let your wealth grow. If you do this, you're taking the right steps in securing your financial future.