Start today! The sooner you start saving, the more compound interest will work on your behalf. It also means you can put less away over a longer period of time and still have a solid nest egg. Check out the tips below and you will be on your way to your retirement goals.
Increase the amount you save on a regular basis.
Many financial advisors recommend saving 15% to 20% of your income per year. Easier said than done. Start with half that amount and increase it by 1% every year. In 7 to 10 years you will be at a very healthy savings rate and you will barely notice the difference in your daily budget.
Does your performance review at work gets you a raise in salary or a bonus? Perfect time to increase your contribution. Nothing wrong with a little celebration too, but add to that contribution as fast as possible, before you get used to that extra disposable income.
Review the IRS withholding amount taken from your paycheck. You may like getting a refund when you file your taxes but you are actually giving the IRS an interest free loan over the entire year. Re-calculate the withholding amount to get as close as you can to having no refund. The extra amount gained in your paycheck can now be put towards your savings contribution.
If you’re about to become a cord cutter (giving up cable TV) consider stashing that monthly savings into retirement. Look at and review all your monthly bills. Did you get a discount on car insurance? Did you refinance your mortgage or student loan? Immediately channeling those savings into retirement contributions will get you to that 20% level in no-time.
Review the expenses on your retirement account
If you have a 401(k) account and your company matches your contribution put as much as you can in it to get the full match. Next, look at the fees for those accounts. Large companies often get a reduced rate for these investments and it may benefit you to max your total contribution within these investment options. You may also want to check out an IRA(Roth or Traditional) in order to lower these expenses. In particular, index funds (S&P 500, Dow Jones Industrial Avg and others) can have the lowest fees and should absolutely be no-load.
For most of us the easiest approach to retirement savings is a long term automatic contribution. It seems our brains aren’t wired to save for something so far away. It’s easier to plan for the present. Automatic contributions that gradually increase over time can be the perfect “trick” for retirement savings .