Saving for retirement is a long process that can take many years and a lot of hard work. It can be difficult to decide how to begin building a retirement savings, and many people wonder how much they will need and how to ensure that they can meet all of their financial goals. If you are one of the many people wondering how to get started with your retirement savings, there are a few things you can consider doing to help ensure that you have enough money stored away to have the kind of retirement that you’ve always wanted.
Where Do I Begin?
While it’s never too early to begin saving for retirement, deciding on how aggressive you want to be and how high that retirement savings should be on your list of priorities will vary depending on the age at which you are when you start to save. The earlier you start saving, the more likely it will be that you will be able to reach your retirement goals. Starting to save as early as your 20s is an excellent idea. If your employer offers any retirement account options, you should be sure to take advantage of them as much as you can. Many companies offer a 401(k) program through which they will match up to a certain percentage or dollar amount that you contribute to your account. Since this means free money for you, it’s important to take advantage of this as much as possible.
When you are younger, retirement savings may not be as high of a priority as it is when you are approaching retirement age, but it should still be on your list. You should take a look at all of your savings goals (retiring, buying a home, saving for your child’s college education, etc.) and decide how much you can afford to contribute to each one. The longer you save, the more time that your retirement savings will have to grow. If you begin saving at an older age, you may need to increase your contributions. Look at your budget, and put in as much extra money as you can into your retirement account. Putting any gifts, tax refunds, or surprise sources of income into your accounts can also help to provide a savings cushion as you approach retirement. You may also want to consider taking a second job as you approach retirement age in order to supplement your income. Some retirees even take on part-time work in order to supplement their retirement income.
What Are My Options?
Generally, there are several different types of retirement accounts that you can use to start saving. The most common ones are 401(k)s, which are typically available through your employer. Even if you aren’t sure whether you will remain at your job forever, you should still invest in those 401(k) options that are available to you. It is possible to roll over your 401(k) from a previous employer so that you don’t lose out on those savings. In addition, because many employers offer matching contributions, your 401(k) will likely become one of your largest sources of retirement savings. Additionally, you can save money through an IRA account, which could be either a traditional IRA or Roth IRA. Since these two types of IRA accounts have different income requirements, you should be sure to conduct thorough research or consult a financial advisor to find out which one is right for you.
How Much Will I Need?
Calculating how much money you will need for retirement involves a few different factors. First, you will need to consider your retirement plans. Do you want to travel, help your children, or start some new projects? You’ll need to consider those costs when planning for your retirement. Take a look at your typical budget, as well, and note where you are spending your money and what percentage of your monthly expenses are devoted to certain areas. Some financial advisors say that your retirement expenses should be a minimum of 60% of the current amount. However, your experience may be different. Consider what you want to be able to do during retirement, and plan accordingly. Also, you should take into account your health care expenses. Many retirees find that they underestimate the amount of money needed for rising health care costs as they age. Since people are living longer than ever before, they will face increased health problems and expenses over time. It also means that your retirement savings will need to last over a longer period of time as compared to previous generations, meaning that the amount that they save will need to be higher.
Before deciding on how much you need to save, make sure to look over what you already have. Examine your savings accounts, investments, and other sources in order to determine where your money is right now. Once you know what you have available, you will be able to better assess what else you need to do to have the retirement you want. Whatever your plans are, start saving today, and soon you’ll feel prepared to have a comfortable retirement.