Are you set for retirement? If you’re like most Americans, you’re finding it difficult to save for a rainy day, let alone the rest of your life. According to CNBC, 21% of people don’t save any (not one dollar) of their earnings. Another 48% of people save less than 10% of their income, the minimum amount recommended by financial advisors. If you fit into one or both of these categories, don’t give up. You can start saving for retirement with these tips.
Start Early, Save Consistently
Consistency is more important than the dollar amount you sock away. How long you save is even more important, especially if you have a savings account that accrues compound interest. The longer you save, the more your money is worth. For example, a $120,000 investment might grow to become $373,407 over 10 years — but that same investment could transform into $1,444,969 if it accrues compound interest for 30 years. For this reason, you should start as early as possible.
Take Advantage of Retirement Plans
Retirement plans are great vehicles for putting away money for the future. What’s more, many company retirement programs offer a matching contribution, which equates to a bonus from your employer. If you’re employed in the public sector or work in education or healthcare, you may be able to contribute even more to your plan. The same is true if you’re over the age of 50. Older contributors are allowed to make catch-up contributions to maximize their retirement savings.
Understand Your Social Security Benefits
Long before you file for Social Security, you should understand your social security benefits. How much will you receive each month? At what age should you apply for benefits? How will your benefits be affected if you retire at 65, 67 or 70?
Social Security will factor in your highest earnings over the previous 35 years to determine your monthly payments. The longer you work, the more benefits you’re likely to receive, although this isn’t always the case. Working a part-time job after retirement may not increase your benefits, for example, but waiting until you’re 70 to apply might.
Plan for All Retirement Expenses
When planning for retirement, it’s easy to forget about unexpected expenses such as medical bills and home repairs. It’s also easy to forget to factor in the cost of inflation. If you’re not sure how inflation and unexpected events will affect your retirement savings, speak to a financial advisor.
Do Not Dip Into Your Retirement Savings
Do you remember how powerful compound interest is? That’s why you shouldn’t dip into your retirement savings unless you have a very good reason to do so. Relying on retirement savings to get you through a hard time could make your life even more difficult in the long run.
Consistency and dedication are key to a successful retirement. If you can’t save 10% to 20% of your income, save what you can afford. When your income rises or you become eligible for increased retirement contributions, save a little more. The most important thing is to save consistently for as long as you can.
~Here’s to Your Success!
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