It's Never Too Late To Start Saving For Retirement


In your 20s and 30s, retirement can seem too far off to worry about. As you get older, college tuition for your kids, home repairs, and various unexpected expenses can become your top financial concern. Whether retirement is years away or just around the corner for you, having a well thought out plan can make the difference between a comfortable financial situation and a tough one. The key is setting your goals and sticking to them.


Make Saving For Retirement a Priority


The earlier you start saving for retirement, the longer your money has to grow. You're also better able to weather ups and downs in the financial markets because you have time to rebuild your assets if needed.


Put away whatever you can afford by having money automatically deducted from each paycheck and deposited in your retirement account. Starting early makes a significant difference because interest is compounded. When you earn interest on your money, that interest is added to your base amount. The next year, you're earning interest on that larger sum.


For example, if you save $3,000 a year in a tax-deferred (you don't pay taxes until you withdrawal the money) account with an 8 percent annual rate of return for 10 years starting at age 25, your $30,000 investment would grow to $472,000 by age 65 even though you made no contributions after age 35. If you start when you're 35 and save $3,000 a year for 30 years at the same return rate, your $90,000 would only grow to about $367,000.


Build Your Plan


There are several steps to build a plan for retirement.

  • Figure out how much you'll need to live on. Some expenses may go down when you're retired, for example, if you've paid off your mortgage, but others may rise, like health care. Also think about what you'd like to do when you're retired and what it will cost. Do you plan to travel? Move to a senior living community?
  • Don't rely on Social Security. For most people, Social Security benefits won't cover all expenses. You can find out what your estimated benefits will be by using the government calculators.
  • Choose where to save. Tax-deferred plans give you a bigger principal to earn returns over time since you don't pay taxes until you make withdrawals. Most people's plans include a mix of stocks and bonds. If your employer offers a 401(k) plan, that's a good option, especially if they contribute to your account.
  • Check your goals and investments. Over time, your needs will change. Each year, make sure your investments will still help you reach your goals. Also, the older you get, the more conservative your investment strategy should be to minimize the potential for big losses.


What To Do if You Get a Late Start


It's never too late to start saving for retirement. Find money to put away by raising your insurance deductibles, lowering expenses and cutting high interest debt. If your employer matches 401(k) contributions, contribute enough to get the maximum match. Consider a more aggressive investment strategy, which could potentially help you build your balance faster. You can also work longer to delay tapping retirement funds and give them more time to grow. 


Build a Foundation for Your Future


Start your retirement savings plan today and be proactive about providing for your future.


This article is for informational purposes only. For personalized financial advice, you should contact a qualified financial advisor.


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