Retirement may seem like it’s lightyears away, especially if you recently graduated and are attempting to settle into your first job and getting used to doing things on your own.
A June 2018 survey conducted by Bankrate found that 61 percent of Americans have no idea how much they need to save to fund their retirement.
Another study conducted by The Center for Retirement Research at Boston College found that 50% of households are “at risk” of not having enough money saved to adequately maintain their standard of living during retirement.
This same study suggested that saving more and working longer may be a solution to the problem of under-funded retirements.
In order to make sure you’re not in the 50 percent who don’t save enough for retirement, it is essential to plan ahead and to be dedicated to building a good retirement fund.
Below are some basics about retirement and tips to get you started on saving.
Many employers offer varying levels of matching for your retirement contributions (i.e., you put in 5 percent of your pay, your employer puts in 5 percent)– this is literally free money getting put into your retirement account by your employer.
Even if your employer doesn’t offer a retirement plan, you can easily set up IRA and use that as your retirement savings account.
The best way to make sure you can live a comfortable retirement?
The longer you let your retirement savings grow, the longer you are accruing interest, thereby making your initial contributions grow larger and larger with time.
For example, say two individuals both invest $100 a month at a 5% annual compound rate of return.
Person A starts investing at age 25 and Person B starts investing at age 35. By age 65, person A will have accumulated $162,000, while Person B will have accumulated only $89,000.
Person A’s investment return is nearly double Person B’s, even though they only contributed $12,000 more of their own dollars.
An easy way to stick to contributing to your retirement is to set up an automatic monthly contribution to your retirement account.
Not having to see the money hit your bank account makes it effortless and painless way to integrate saving for retirement into your budget.
Even if you have limited resources and are on a tight budget, it is still important to try as hard as possible to contribute something, however small, to your retirement account each month.
Cutting down on monthly expenses and using those savings to invest in your retirement account is one way to fit your retirement fund into your budget.
Shopping for deals on things like groceries and household items and being stricter about discretionary spending will allow you to free up money in your budget to instead put towards retirement.
Making your retirement fund a priority now will benefit you and your family in the long run, and allow you to not only retire one day, but retire comfortably.