For most people, life will follow a similar pattern. They go to school, obtain the education they need to enter the world of work, build a career for several decades, and then finally retire, ready to enjoy the latter years of their life in a state of rest and relaxation.
However, the actual quality of life you experience in retirement really depends on how much money you’ve managed to save and how sensible you’ve been in terms of planning ahead and preparing for those years.
Studies show that American workers can have vastly different amounts of money saved for retirement. The average value of a 401(k) is close to $100,000, but many people have far less saved and can struggle to cope as they get older.
For this reason, many people like to start planning for retirement as early as possible, making savings here and there and taking any advice they can find to safeguard their future. Preparing now can make a real difference in years to come, so here are some top tips for planning your retirement income.
Our first tip is also one of the simplest: start saving for your retirement as early as possible. By saving and investing now, you’ll be putting yourself in a better place for the future, and starting just one or two years earlier really can make a massive difference.
Simple math shows that if an individual puts away $100 per month from the age of 25, they’ll amass more retirement savings than someone saving $125 per month who only started at the age of 35. Saving for retirement in your 20s is therefore highly recommended.
These days, it’s easy to pour money right down the drain without even realizing it. Many people sign up for multiple subscriptions, and gym memberships, they visit fancy coffee shops when cheaper alternatives are available, they make use of public transport rather than walking, and so on. There are probably many ways you can start saving money right away, without impacting your life in any negative way.
Go through your accounts and look at where you’re spending cash, trying to find ways to limit your expenses where possible, eliminating needless subscriptions, canceling that gym membership you haven’t used for years, and so on. More money saved now means more money for your retirement.
Many employers will offer classic 401(k) plans to their employers. If you’re eligible, be sure to take part in this and actually make contributions to it. Not only will this help you amass more savings for the future, but it can also help you save cash in the short term too, as you’ll have a little less take-home pay and be more motivated to spend sensibly.
What’s more, many employers will offer to match your 401(k) contributions, and this kind of initiative can make a real difference to the save of your retirement nest egg. Employer contributions are essentially free cash, and nobody should be saying no to free cash.
As well as 401(k), you may also want to consider setting up an IRA (individual retirement account) to build up your retirement savings and get ready for the future. There are different types of IRA, and contributions are often tax-deductible. One of the most popular options is a Roth IRA, which allows you to contribute post-tax earnings and grow your money tax-free.
What’s more, the investments you make can grow over time, so when the time comes to announce your retirement and begin life as a retiree, you’ll have additional funds to support you.
Don’t feel like you have to prepare for retirement alone. It can be quite a confusing, complicated, and even overwhelming process to navigate the intricacies of 401(k)s and IRAs and everything in between, but there are people out there who can help. Retirement planning experts are available to guide you through the process, making recommendations, and simplifying the more intricate aspects.
These financial assistants can help you make the right choices for the future, showing you where and how to save, explaining your options, and giving you advice on the best course of action to follow. Taking some time to speak with them now could help you out massively in the long term.
Your retirement might seem so far away, but even if you’re still young and have many years of work ahead of you, starting the preparations now can lead to big benefits in the future. Follow the tips and advice above to get your future finances under control and secure an enjoyable retirement for yourself.