Planning for retirement can be daunting, but it can be manageable by following a few simple steps. The journey to a worry-free retirement starts with saving early and consistently. It can be challenging to rearrange your budget and your spending habits, but the benefits of financial stability are worth it. Below, we have listed the fundamental principles of retirement savings and some tips and tricks to ensure you thoroughly enjoy your retirement years.
Start Saving Early
The earlier you start saving for retirement, the more time your investments have to grow. Even if you start small, it is better than not saving. A great way to start is by contributing to an employer-sponsored retirement plan, such as a 401(k) or 403 (b) plan. These plans allow contributions to be taken directly from your paycheck and invested in your retirement. If your employer offers a matching contribution, use this free money.
Getty Images/ iStockphoto | Investing in a 401(k) is a common way to save for retirement
Figure Out Your Magic Number
Your “magic number” is the amount of money that will allow you to live comfortably for retirement. The easiest way to calculate this number is using an online retirement calculator that considers your current age, retirement age, monthly expenses, and expected Social Security income. Once you have calculated your magic number, plan to reach it. Start saving extra money per month until you hit your goal.
Choose the Right Investments
Your investments should be selected based on risk tolerance, timeline, and goals. Generally, younger savers should invest more in high-risk, high-reward securities such as stocks, while older savers should invest more in low-risk bonds. Throughout the saving process, you must monitor your investments regularly and adjust as you approach retirement age.
Vista/ Getty Images | The best time to start saving for retirement is 20 years ago
Keep Track of Your Expenses
Keeping your monthly expenses is essential to ensure you don’t overspend and adjust your budget over time. By keeping track of your expenses, you can quickly determine areas where you can cut corners. Use budgeting software such as Mint or You Need a Budget to help you keep track of your spending and streamline your financial process.
Consider Delaying Retirement
Even if you believe you have enough money saved up for retirement, it’s essential to consider delaying your retirement date. By working for an extra year or two, you can significantly increase your tax-advantaged retirement savings options with an extra year or two of contributions. Additionally, working past your retirement age provides other benefits, such as enhancing your Social Security payout and maintaining employer-sponsored healthcare options.
Matthew Modoono/ Northeastern University | There’s never enough time to do all the nothing you want
Diversify Your Investments
Investing can be daunting, but it’s important to diversify your portfolio. Don’t put all your eggs in one basket. A mix of stocks, bonds, and mutual funds can reduce risk and potentially increase returns. Consider hiring a financial advisor to help create a diversified portfolio that aligns with your risk tolerance and goals.
