No matter how old you are, it’s never too soon to start saving up for your retirement. Continue reading to learn the best way to save for retirement at any age.
Given that nearly 70% of Americans have less than $1,000 saved for retirement, it shouldn’t be hard to be in the upper 30% of retirement account holders. The key to having a comfortable retirement is to start saving at an early age. The best way to save for retirement is to take an active role.
Here are 5 recommendations for what action you should take to start saving now.
1. Save The Magic Percentage
While most people will tell you that you need to save as much as you can, the most widely accepted figure for how much you should save is 10%. Depending on your economic situation, this might not be a possibility, as this figure is for people who are in a good economic situation.
If you can’t save a full 10%, find a figure or a solid dollar amount that works for you. The point isn’t that you have an exact amount by a certain age or date. It’s more important that you’re saving something.
Even if you’re saving 10% of a $40,000 a year income, after 30 years, that’s enough to buy a modest home in a small town. No matter where you’re at in life, saving for retirement isn’t a bad idea. Set your goal now so that you can get into a good habit of saving.
It’s much easier to start saving money when you’ve already got some saved than to wait for the perfect time or the perfect conditions for it.
2. Cut Unnecessary Costs
One of the best ways to set yourself up to save for retirement is to start cutting unnecessary costs now. If you’re paying a large monthly bill for cable and a cell plan you don’t get the most out of, consider cutting back. A pay as you go plan for your phone and a subscription to Netflix might be more useful and cheaper than your current situation.
If you work a steady 9-5 job but find yourself eating out every single day, you could be cutting back there. Packing a lunch every day for a month could save you $200 to $400 per month. If you’re not putting away $200-$400 each month for retirement but also eating out every lunch, there’s something wrong.
Everyone needs to have their small comforts, like a latte here and there or a Saturday night pizza party. However, the best way to save for retirement is to live within your means whenever possible.
3. Learn About the Market
To get the most out of your money, you should learn a little bit about the stocks and bonds market. The less you know, the more ill-equipped you are to invest, even in safe bonds and retirement accounts. While you don’t need to be on the trading floor day in and day out selling your investments and buying others, you should get to know trends.
While stocks will go up and down, the overall trend for everything is “up”. Money invested in almost anything on the market will grow faster than inflation or anything sitting in a bank account.
While it’s important to have cash on hand at all times, too much money sitting around is losing value. Every day that your money isn’t used to make more money, it’s deteriorating and losing value.
Learning about the market can be fun and adventurous. If you have friends involved in the stock market, get them involved. People invested in the stock market get excited when new people join and, moreover, they love to give all the tips they learned over the years.
4. Open an IRA
An IRA is a retirement account comprised of a portfolio of different options. When you open a traditional or a Roth IRA, you get to determine how much you want to contribute at any given point. You can also self-direct your IRA if you need a little more control over the situation.
Opening an IRA can be a big move toward adulthood for a lot of people. It means you’re now invested in your retirement.
Some IRA programs connect to the payroll system at offices. Essentially, a worker will agree to contribute a certain amount of money every month and corporate offices match that. It encourages workers by letting them know that they’ll still be taken care of after they’re older.
5. Have a Loose Retirement Goal
It’s hard to save for retirement when it feels nebulous and there’s no real goal in mind. If you want to own a house, move to a different house, or buy your parents’ property when you retire, set your intention now. Putting together a list of the things you want to do is the first step.
Your next step is to start thinking about how you’ll want to be in that retired phase of life. If pursuing a hobby is your main goal, figure out how you can do that in the most ideal conditions. Think about how much you’ll need.
If homeownership is in the cards, think beyond the building itself. You’ll likely face high taxes on the house so make sure you’ve got enough to pay those off beyond the home itself. Your partner and loved ones will be happy for you when they see you have such clear goals, laid out in black and white.
The Best Way to Save For Retirement is to Start Now
One of the biggest hurdles to saving for retirement is having no savings at all. The best way to save for retirement is to have clear and short-term goals, to keep moving the goalpost out, and stay focused. The more consistently you put money aside, the happier you’ll be with yourself.
If you want to make sure all of your extra income goes into retirement, check out our guide to overlooked tax deductions you could be putting in your IRA.