This is the part of financial planning that makes Millennials either roll their eyes from boredom or from the disbelief that saving for retirement is even possible. So far we’ve covered how to pay for basic necessities such as healthcare, paying off student loans, saving money for a rainy day, tackling existing debt, paying for a new baby, AND saving for the all-important down payment on a new home. After all that, who has any money left? Well…hopefully you do because the next piece of advice I’m going to give you is to plan for your twilight years.
Let’s face it, we’re not going to be young forever and work our entire lives (at least I hope not). That means we have to make sure we can afford to live on a much smaller budget. Almost every day there’s a story about Social Security running out of money and potentially dissolving before most people working today even retires. Nevermind the fact that a good chunk of your earnings over your career would have went to fund the very program that supposedly will dissolve by 2035. That means it’s up to you to make sure you’re not living in a shack and eating pork and beans the rest of your days.
Here’s some advice on how to tackle saving for retirement
1. Determine How Much Should You Should Save
There are a dozen calculators online that can help you determine what you’ll need to be comfortable in your retirement years. One major thing to consider is your current lifestyle and what you want to do with all your newfound free time. Do you want to travel? Remodel the house? Take up an expensive hobby? If so, you’ll need to plan your retirement accordingly. Another factor to consider is that you are more likely to live longer. Now, that’s not a bad thing, but that means that planning to retire at 65 and saving enough for only 10 years won’t cut it anymore. People are living longer, so consider saving enough for 20+ years.
2. Work Your Way Up
Many experts will tell you that you should save at least 15% of your income each year for retirement. Well if you have student loans, a mortgage, and college savings plans for kids that can feel like a daunting task. No need to do it all at once…work your way up. Start by saving 1% a year (because something is better than nothing) and then plan on saving more each year. Also look at your benefits at work to see if there’s a matching program, which will help you to save 15% in half the time.
3. Don’t Just Rely on Work Benefits
The more money coming in, the better off you’ll be. Don’t just rely on Social Security and your retirement plan at work. Individual Retirement Accounts (IRAs) can be a great way to save a little extra money for your twilight years. IRAs, in most cases, have generous contribution allowances and can be opened at most neighborhood banks. This type of account is also a MUST for those who are self-employed. And the best part is that you cacn have more than on IRA, but income limits and other considerations apply. You can find out more about IRAs on CNN’s website which offers amazing retirement advice.
Now the advice I’ve offered above is literally the tip of the iceberg. You should start by looking at your budget and saving that 1% of your income and talk to your Human Resource office about any matching contributions you can take advantage of. Remember it might seem like a lot, but you’ll thank yourself later when you can retire, see the world, and manage your expenses.
Good luck and happy saving!