The sooner you begin saving for retirement, the more time your money has to grow and weather the ups and downs of interest rates.
Tips to Help You Build A Retirement Saving Plan that Works for You
There are several steps you can take that will help you put together a retirement savings plan that works with your budget. The goal, especially if you're getting a later start, is to save as much as possible, but if you make a plan that puts too much pressure on your budget, you may not be able to stick with it for the long haul, so bear that in mind while setting up your plan.
- Start by figuring out when you want to retire and how much money you'll need to live comfortably. Today, many people work past the age of 65, so that can be one way to increase the amount of time you have to save for retirement. Add up the income you'll have access to when you retire -- Social Security benefits, pension benefits, 401(k) and IRA savings, and any investments. Some of your expenses may go down when you're retired, for example, if you've paid off your mortgage, but others may increase, 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? To help you project how much you'll need to save to live comfortably, you can try one of the many retirement calculators* on the Internet.
- Choose where your savings will go. If your employer offers a 401(k) plan and especially if they match your contributions up to a certain amount, this might be a good option for retirement savings. Another plus is that your savings are automatically deducted from your paycheck and deposited in your retirement plan. If you don't have a 401(k), consider an IRA. Each year, review what you're saving and how your investments are performing to make sure you're still on track. To build a plan that fits your needs and goals, it can be helpful to talk with an independent financial planner.
- Find the money you need to fund your savings. Review your current budget and look for opportunities to save, such as cutting back on eating out, entertainment, and travel. Other ways to possibly reduce expenses include increasing your home, renter's, and auto insurance deductibles (however, make sure that the deductible isn't too high for you to cover) and choosing a less expensive cable, internet, and cell phone plan. If you're working to pay off higher interest debt, consider consolidating your debt if you can get a lower interest rate. Take the majority of the money you save and put it into your retirement savings.
By building a retirement savings plan that fits your budget, you'll be on the path to a more secure future.
* We are not affiliated with AARP nor do we guarantee or warranty the functionality or accuracy of the calculators on the AARP website.