Picture living in a beautiful house, driving a nice car, going on fun vacations, and doing your favorite activities all day with your partner, family, and friends. Doesn’t this sound amazing? This could be your life during retirement. So now how do you get there? How do you get to your ideal lifestyle before you are too old to enjoy it? Read on for tips on how to save for retirement.
1. Start Saving Young (Or Right Now!)
Start to save for retirement when you are young or immediately if you currently are not. The younger you start to save for retirement the longer it has to grow without doing anything. The money you save has the gift of time to “sit there” and gain while you are doing nothing.
I have always been a money saver. When I was a kid, anytime I got birthday money or earned babysitting money I always saved it. I was always saving for a bigger or better opportunity. By nature I believe people are either money savers or spenders. However, no matter what you are, planning for a smart financial future is important. We never know what the future holds, and we should always have something saved for whatever life throws at us. Click here for easy ways to save money.
Even if you didn’t start saving young, late is better than never. Many people don’t start to save for retirement until their 40’s or 50’s. Some common misconceptions are “We don’t have the money right now to save for retirement.” or “We will start saving once the kids are out of house”. People always think there is plenty of time to start saving. However, the longer you wait, the less time your money has to grow. This could mean retiring at a late age or worse yet, never being able to retire.
2. Match Your Employer Contributions to Save for Retirement
If your employer will match your contributions to a 401k or 403b make sure you are taking advantage of this! Make sure you are contributing at least the amount or percentage they will match. Always do what you need to get the free money. I can’t say it enough. It is free money!
Furthermore, your contribution is usually pre-tax meaning you get to put it in savings before it gets taxed. In addition, the money typically automatically comes off your check. This way after a few checks you won’t even notice the money. If you can contribute more than the percentage your employer matches great. But at least contribute the amount they match to earn as much free money as you can.
3. Contribute Money into a Roth IRA to Save for Retirement
We all want to retire from work at some point right? Some may want to retire sooner than others. Although the question is are they financially ready to retire? I heard this great quote:
“Wealthy people invest first and spend what is left. Broke people spend first and invest what is left.”“Anonymous”
If you want to retire early or on time for that matter, then you need to save and invest first and early. In fact, make it a priority to invest in your retirement. A great and relatively safe investment vehicle is the Roth IRA.
A Roth IRA is a long-term retirement savings option. As you put money into the account it grows over time. With a Roth IRA your money gets taxed on the way in instead of when you cash it out. Therefore, you end up getting to keep more money because you keep all the profits you earned.
Even if you can only contribute a few dollars a month something is better than nothing. You may notice a change in cash flow at first but soon you don’t even realize the money because you get use to having less. You can always take a break or stop contributing if your cashflow changes.
4. Keep An Emergency Fund
I know what you are thinking. How is keeping an emergency fund going to help me save for retirement? Things happen in life where you may need money quick. Maybe your car broke down and it costs $2000 to get fixed or you need a medical procedure and it costs $5000.
It is difficult to come up with cash if you have not set aside funds for these unforeseen expenses. Usually people go into debt or end up taking it from a retirement fund to cover current emergency expenses. So keep an emergency fund for when life throws you a curve ball. This way if something happens you do not have to dip into any of your retirement accounts.
High Interest Savings Account
So where should you keep this emergency fund? Keeping money under your mattress or in a drawer is the worst thing you can do. It is not gaining interest and it is not safe. Another not so great idea is keeping it in a savings account where the interest you earn is next to nothing.
Instead, research savings account interest rates or ask your certified planner for a high interest savings account. Then keep your emergency fund in a high interest savings account. The return is better for money sitting in a savings account. However, a potential drawback is it may take a couple days to draw money out. So you need to plan a little ahead if you need to use it.
One example where we took advantage of this account was when I was pregnant. We put a few extra dollars in the savings account each week. Then 9 months later when those huge bills came we easily had enough money to pay them off. When you are anticipating a huge bill start saving money early. You will thank yourself later.
5. Work With a Certified Financial Planner to Save for Retirement
By no means am I a licensed financial planner. Never the less, these tips are things I have learned from personal experience and from my financial planner over the years. My husband and I started working with a financial planner when we got married at age 25 and was one of the best decisions we ever made. They are experts on planning your financial future and what to do with your money. A CFP helps you meet your short term financial goals and to save for retirement.
Final Thoughts on Saving for Retirement
At some point everyone wants to retire from their career. Moreover, finances play a big role on when a person can retire. Take hold of your financial retirement planning by doing these 5 things. Start saving now (if you haven’t already). The younger you start the more time your money will have to grow for free. Contribute to a 401k or 403b at work to get the free money that your employer matches. Put money into a Roth IRA for retirement savings. Keep an emergency fund in a high interest savings account. Lastly, meet with a certified financial planner to set you up for retirement financial success. Don’t delay and start to save for retirement today!