As we embark on a new year, it’s wise to take a moment and consider the future. Retirement planning is easy to neglect because immediate financial needs take precedence. However, every consumer can benefit from finding small ways to increase their retirement savings.
Retirement Planning Tips
When it comes to planning for retirement, many consumers feel intimidated or lost. It’s much easier to just focus on securing short-term financial stability. Professionals who specialize in financial counseling often stress that failing to prioritize retirement early on is a big mistake. Here are some ways to start your retirement planning this year!
First, it’s important to understand and predict what you’ll need to pay for in retirement. You’ll need to cover mortgage or rent payments plus other living expenses, much like you do now. However, as you age you may accumulate unforeseen expenses depending on your circumstances. For example, many retirees acquire additional health expenses such as an in-home nurse or special medical equipment. Someone with mobility issues may need a single-story home with no stairs. Medical insurance costs will also change as private insurance gives way to Medicare.
Sit down with your partner now, and calculate living costs for when you reach retirement and beyond. Deciding how much you’ll need to have saved is an important part of retirement planning because it determines how much you’ll need to put aside each month.
Note: If you’re currently managing credit card debt, you’ll need to focus more on paying that off before dedicating extra cash to retirement savings.
Implementing Your Plan
Now that you have an idea of what you’ll need, figure out how much you can currently afford to contribute to a retirement savings account. If you already have a sizeable nest egg, that’s great. If not, don’t worry—there’s still time to start saving!
The best way to start saving for retirement is to establish a household budget that steers you toward efficient spending. Note how much you earn each month and how much you spend on bills and other expenses. Creating a spreadsheet of expenses or using a budgeting worksheet is a great way to track cash flow. With every dollar accounted for, you’ll be able to figure out where to cut costs and how much you can afford to put aside for retirement and other savings needs.
Boosting Retirement Savings
With a budget in place, you can now focus on maximizing your saving efforts. This includes reducing spending where possible and using any discounts available to you. If you use services like AAA, you can get lower rates on many products and services. See if your employer works with any corporate savings companies, which allow employees to get small discounts on shopping, travel, and more.
Speaking of employers, does your company provide a 401(k) plan? This is definitely a benefit you should take advantage of if it’s available. Even if your budget is tight, any pre-tax contributions you make are worthwhile. If you simply cannot afford to set aside ten percent of each check, then try to cut back so you can put away maybe three or four percent. Try to at least max out any contribution matching offered through your employer since it’s like free money for the future. Employer-sponsored retirement plans are an easy way to make sure you’re investing wisely and consistently growing your retirement fund.
An additional way to bump up retirement saving without cutting into your monthly budget is to put your tax refund toward long-term savings every year. Since your tax return is a one-time payout, it’s not built into your normal spending and doesn’t affect your budgeting strategy. It’s a great way to dramatically increase retirement savings once a year without creating any unnecessary financial stress. It’s also a good idea to maximize your total tax refund by looking into any tax breaks or deductions you might qualify for.
Prioritize the Future
No matter how far you are from retiring, retirement planning should be a top priority alongside debt elimination. The earlier you start saving, the more comfortable you’ll be in retirement. You may have to cut back what you’re spending now, but remember that every sacrifice you make to save today will literally pay dividends to your future self.