Views on saving for retirement vary widely. It may seem impossible, too far away to start, or an important part of your budget already. For this month’s personal finance challenge, the Talking Cents blog challenges you to start saving for retirement so you can be financially stable in your golden years.
How to Plan for Retirement
Nearly everyone will reach an age where they won’t be able to work any longer. With expenses to pay, a retirement savings is crucial to cover everything from day-to-day living expenses to travel to medical care. According to a recent ACCC poll, not saving enough for the future is one of the biggest financial fears people have.
Not only should everyone save for retirement, it should start as early as possible. The earlier a person starts saving for retirement, the more time the compound interest has to work its magic on your investments. If you are heading towards your first job out of college, make sure to incorporate a retirement fund into your financial plans. If you are older, with other financial obligations, there are still ways to save. Let’s take a look at how to start saving for retirement.
Step 1: Mapping My Retirement
The first step in this retirement challenge is thinking about the lifestyle you desire to have in your retirement. You may want to save a million dollars, live modestly, travel the world or leave a large inheritance to your grandchildren. These are all valid goals to have; they all require planning to be successful. So what are your retirement goals?
Step 2: Calculating My Retirement
Now that you have a sense of your goals, it’s time to calculate how much money you will need to save for your retirement. Using this retirement calculator, you can gain a general sense of how easy or difficult your goal will be. Some factors the calculator considers are your age, desired annual income during retirement, and when you plan on retiring. Run a few scenarios to see how the outcomes changes. Were you able to retire when you thought?
Step 3: Budgeting for Retirement
As with all financial planning, it’s time for a budget! Once you know how much you will need to contribute annually to reach your retirement goals, you can now prepare room for it in your budget. If you have any consumer debt, it’s important to eliminate it as quickly as possible so those resources can be used in a more constructive way. Remember, as you climb the professional ladder, you may be able to contribute more each year or every few years to your retirement fund.
Other Retirement Tips
There are many ways to save for retirement. Here are a few more retirement tips to help you save:
- Live frugally now so you can save for later
- Do not make any early withdrawals
- Add extra to your fund when you can
- Factor in an emergency fund, taxes and inflation to your retirement goals
- Take a class or consult a professional financial planner
- Take advantage of matching contributions for 401(k) plans
Read more savings tips in ACCC’s Preparing for Retirement section.
While this personal finance challenge can’t be completed in June, you can understand your retirement goals and develop a plan on how to reach them.
Review past challenges or to speak to a credit counselor today about budgeting and managing your finances, call 800-769-3571.