Each stage in human life comes with challenges, and not many of us can escape this aspect of life. However, the good news is that we can prepare for such stages before we arrive there. Today, we want to explore how to save for retirement. Frankly, this is one path many people have fallen short of.
Many people feel that they do not have to save for retirement. Having this thought alone is already a recipe for disaster. Luckily, if you have no idea of how to go about it, this post will share some invaluable insight on what you should do.
At What Age Should We Start Saving For Retirement?
Someone once asked, “Is there a specific age when one should begin saving for retirement?” While there is no specific law universally that says you should start to save for retirement at a certain age, there is always the right time to do something, and then there is the wrong time as well.
However, the best advice for people when they ask such kinds of questions regarding retirement savings is to start early.
Nothing beats starting early in life. In other words, early preparations will save you many unwanted stress. Did you know that the earlier you begin saving, the more time you give your money to grow through financial principles like compound interest?
Why Start Early?
Another frequently asked question is, “Why should I start early?” And I get this a lot. Many people just want to know the benefits of a thing before committing to it in the long term.
For instance, if you say exercising is good, what does my body stand to gain? You cannot blame them for wanting to know, right, seeing how different people have lost their retirement savings mysteriously in the hands of some financial adviser.
So, here are some excellent reasons why starting early is good.
1. Compound Interest
Truth be told, you can partner with time on this one and reap all the benefits of following this simple principle. Not many people do this because it requires a high level of discipline, but you can start right away after reading this article.
For instance, if you start in your 20s or 30s, your investments will have more time to compound. Interestingly, that means you can earn more interest.
Well, that’s not all. Additionally, the earlier you begin this journey, the less you need to contribute monthly to reach your retirement goals set for yourself. This is one sure reason to save for retirement early.
2. Building Good Habits
What is easy sometimes is often not the best for us. There is the pain of regrets and the pain of disciplining yourself. So, which would you choose if you had the power to make that choice now? What if I told you that you now have the power to decide which of the two pains you will subject yourself to?
When you begin early, it helps you develop excellent financial habits such as saving and budgeting. Also, there is a better chance of you facing less financial stress later in life.
Most of the time, those who neglect to save for retirement early are prone to facing more stress about the entire situation. Why, you ask. They become anxious when approaching that age, especially if they realise they have nothing on the ground nor any solid plan or something to fall back on after retirement. That, itself, is not a good thing.
3. Flexibility and Risk Management
Statistics have it that young people who begin saving for retirement earlier than others can afford to take more risks. Hopefully, that will lead to more returns than usual. In other words, there is this tendency for higher risk tolerance because of time.
Also, starting on time gives you the advantage of flexibility. That means you can adjust your rate of savings or even your investment strategies based on the challenges you might face in that season of your life or even economic crisis.
4. Dealing with Life’s Uncertainties
As much as we advocate taking control of our lives, certain events we never saw coming can force themselves into our lives. In such cases, what should we do?
Beginning early creates a safe space in unfavourable life events like health issues or job loss. These unforeseen circumstances can momentarily stop you from saving. You cannot do anything in such moments, but hope the season passes quickly.
Lastly, those saving for retirement early can choose to retire earlier if they reach their financial goals sooner than expected. Isn’t that a good thing? Well, it is to me.
How Do You Save For Retirement?
Usually, after I successfully answer their questions, another is asked: “How do I start saving for retirement?” So, how do you save for retirement? Let’s look at a few essential steps to take toward achieving your retirement goals.
1. Start Saving, Keep Saving, and Stick to Your Goals
You will need a savings retirement plan, but we will look at this as we go further. In life, there are laws, and I want to draw your attention to this: nothing moves until you move. In the same way, wishers never get anything worthwhile done.
Now, the idea is to begin saving. Many people dwell so long on the mountain of “I am going to” for most part of their lives. With such a mindset, you can never get your savings for retirement up.
When you start saving for retirement, the next call of action is to be consistent with the practice. Trust me, it won’t be an easy ride, but you have to keep at it because that is how your retirement goals can be fulfilled. I need not tell you how saving is a rewarding practice.
Many people have this notion of starting big. Too often than not, such folks never begin. So, my point is this: how about starting small and being consistent? Nothing beats consistency. Remember that the earlier you begin to save, the more time your money has to grow. So, kindly prioritise saving for retirement now before it is too late.
2. Regularly Increase Your Retirement Savings Rate
I usually like to be very relational when I write or discuss such topics. Perhaps the goal is to save 20% of your income. However, in reality, that may not be possible immediately because of the current needs surrounding you.
Remember, I advised starting small and being consistent instead of wanting to start big and never beginning at all and never being consistent. Starting small is a terrific idea. However, what is more awesome is steadily increasing your retirement savings rate as your income increases.
You can be steady and reach your goal faster if you increase the sum you contribute to your retirement account by 1.5% annually. When you do this consistently, your goal of putting 20% of your income into your savings account for retirement will no longer be a dream you cannot achieve.
Additionally, if you get a bonus you never saw coming, that’s great news. Add the amount you put in your retirement savings immediately. Never forget that time plays a vital role in compounding your investment returns.
On the other hand, once you pay off debts (car loans, student loans, or credit card debt), do not use the money you were paying to go on vacation. Instead, keep making the exact monthly payments into your retirement savings accounts.
The main objective is to devise a plan that works and stick to it.
3. Downsize Your Life
To save for retirement, you will need to cut some unnecessary expenses. This is why it is advised to know the difference between your wants and needs. Many times, when we get that extra cash, one of the first things that come to our minds is to move to a bigger apartment and get the latest car or gadget. All these things are not bad, provided they are assets and not liabilities.
Creating a budget can significantly help in this area. A budget helps identify areas where you can reduce spending and channel that money towards retirement accounts.
Furthermore, instead of upgrading to a bigger house or getting the latest toys when you get a raise, how about still making do with what you have to lower your expenses and then ship that extra cash to your retirement savings accounts? In a nutshell, resist the urge to increase your spending on unnecessary things. Trust me, those temptations will come knocking, but you have to resist them for the greater good.
When you cut out unnecessary expenses, you have more room to save. This way, you can enjoy the simpler things in life.
4. Stay Informed And Adjust As Needed
Never underestimate the power of knowledge. It is said that the more we know, the better choices we can make, and that’s a fact. Studying the market, especially if you have made some investments in that area, would be a clever thing to do. So, as often as possible, create time to go over your investments and retirement savings.
As always, never be afraid to re-strategise if you have veered off the road. That could mean going back to the drawing board to find a solution. That could translate into adjusting your rate of savings or retirement age. Remember, it’s never too early or late to readjust.
5. Consider Professional Advice
This is also an excellent step to take when considering how to save for retirement. If you are clueless about what step to take or when I strongly suggest you consider seeking a professional’s help.
I have come to realise that your retirement money might grow quicker and last longer if you use a certified and trusted financial advisor. They can help you set personalised goals, stay on track, guide your investments, and help you make adjustments as your circumstances alter.
So, one of the best ways to save for retirement is to consider seeking a financial planner or advisor.
6. Create a Retirement Savings Plan
If I may, what’s your saving retirement plan? It is always best to create an excellent retirement savings plan. I’d like you to see it as an action plan instead of a deprivation plan. Create what works best for you and stick to it.
Always remember that retirement is expensive, and it is not about how much you can afford to spend in your active years, but it is all about how much you can afford to save for the days ahead – retirement days! Moreover, you can use retirement calculators to calculate how much you will need to save each month to get to your goal. Also, remember to factor in inflation because times change.
7. Set up an Automatic Direct Deposit
One of the major problems faced on this journey of planning towards retirement is self-discipline. So, how about putting your contributions on autopilot to save yourself from falling into the numerous temptations that await you?
So check in with your employer and see if you can take part of your salary and automatically make those deposits into your retirement savings every month. In a nutshell, remember to pay yourself first by making your retirement contributions a priority.
8. Move to a Cheaper Location
Each city varies when it comes to the cost of living, and unfortunately for many, this factor hasn’t helped them. Regarding this topic, you can do some research to find cities or states that will aid you as you take that step toward planning for retirement.
There are cities or states with reasonably low living costs and taxes, thus allowing you to keep more money in your savings account for retirement. So, if your current state doesn’t have all I just discussed, it might be wise to do some research.
9. Put Every Tax Refund Into Savings
Trust me, it is always tempting to use that extra cash for a new toy or some other thing that is totally unnecessary. Many do not understand that such kinds of money can be diverted to something better – retirement funds. Listen, it is the perfect opportunity to boost your retirement savings.
10. Get a Part-Time Job During Retirement
Many people do not fancy the idea of just being fully retired. Most usually say, “What then do I do with my life?” So, if you are thinking of what to do with retirement, how about getting a part-time job?
It will interest you to know that many retirees enjoy working as part-time workers. I can’t help but think about the movie “The Best Exotic Marigold Hotel.” In that movie, the character Evelyn Greenslade, played by Judi Dench, got a part-time job even in her retirement.
My point is that even after retiring from active service, you can still get a part-time job to keep you occupied. So, do some research and get into what interests you.
Remember, it’s never too early or too late to start to save for retirement. Of course, there are other steps one should take when considering how to save for retirement. Some include knowing your retirement needs, considering basic investment principles, and learning about your employer’s pension plan.
Finally, remember that the earlier you start saving money for retirement, the more time your investments have to grow. Furthermore, following these steps can help create a better retirement savings plan that can help you reach your retirement goal and enjoy your retirement years.
More interesting articles can be gotten from us when you click here. Also, our social media platforms are a go-to place for exciting life hacks. And you can get them when you click here.
Always remember that caring is sharing!
