What Are You Doing Now to Save and Prepare For Retirement
According to the U. S. Department of Labor, less than one-half of all Americans know how much they need to save for retirement and almost one-third of workers who have access to a retirement plan through their employer do not contribute funds for retirement. However, the average person will live approximately 20 years after they retire. Do you know how much you need in order to support yourself through your retirement years? If not, this is your first step in preparing for retirement.
CNN Money’s retirement income calculator allows you to calculate how much money you will have in your retirement account based on your current age, anticipated retirement age and rate of saving. The calculator estimates what you will need in both today’s dollars and projected dollars the year you retire. If you realize you are “falling short” on retirement savings after using the calculator, there are steps you can take now to catch up on retirement savings.
Things you need to do now to save and prepare for retirement
Manage your financial life – Managing your current financial life will help ensure that you are prepared for retirement. Living within your means, prioritizing saving and handling debt responsibly are all essential elements of a strong and healthy financial plan. Developing a weekly or monthly budget helps you manage your money better as you keep track of your income and expenses. Your budget should include an amount allocated to savings and retirement just as you do for food, utilities and housing. Placing your monthly savings on “auto pilot” with direct deposit or automatic draft will help prevent the temptation to skip saving for retirement when your budget is tight.
Start saving right now – If you are in your twenties, saving for retirement may not be a high priority. However, time is your friend when preparing for retirement - - the earlier you begin saving for retirement, the more money you will accumulate. Even a modest amount grows quickly if you are faithful each month. For example, if you begin with a $100 deposit, add $20 per week for 40 years, at a simple interest rate of 4% you will have almost $119,000. As you advance in your career, your income increases and the amount you contribute to savings increases, your retirement fund will grow much larger.
Retirement accounts – If your employer offers a retirement plan, it is important that you enroll and contribute as much as possible each pay period. If your employer matches your contributions, you can maximize your retirement savings by contributing the maximum amount each pay period that your employer matches. You should also open an Individual Retirement Account and begin contributing weekly or monthly. As discussed above, even a small amount will grow quickly as you continue to add to your retirement savings.
Set retirement goals – Setting goals will keep you focused on your retirement plans. Even if your long-term goals change, having an idea of how you want to spend your retirement years will make saving for retirement more rewarding. If you want to move to the beach or the mountains, take a trip around the world or simply sit on your front porch and watch your grandchildren, having enough money in your retirement accounts to allow you to enjoy your retirement years is an important goal. Set goals such as increasing your retirement saving by 10% each year or paying off your home 10 years early and keep working toward each goal to make your retirement years truly golden.
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