Note: While this does go into tips for budgeting. This article is not purely financial advice. It is a general guide that you can look at and draw conclusions from. We highly recommend you talk to a financial professional if you’re looking for advice.
Did you know that only half of working Americans have a plan for retirement? Since this is generally the goal for… well, everyone, you’d think the number would be much higher! On average, an American spends 22 years of their life retired. That’s about ¼ of your entire life! So, its important to start saving as soon you can.
Since this is such an important issue, we’ve put together several articles about retirement planning and the things you should think about before retiring, but we figured its time that we start talking about the things you can actually do that will help you prepare for your retirement.
Have a Number in Mind
Retiring is expensive! Your first step should be to have a goal. What is the dollar value you need to retire? In our first road to retirement article, we discussed needs and wants. It might be important to have two different amounts of money in mind, a dream goal and a needs goal.
By setting a target, you can better plan your savings and always have something you’re aiming toward!
Set Savings Goals
One of the best tips we can give is to earmark certain savings goals. You can do this each year, month, or even week! We recommend you start small and slowly work your way up to bigger numbers. Remember that savings can grow when invested properly. And the earlier you start, the bigger the eventual payout will be.
Where should I start? Think of your retirement goals. How much will you have to save annually to get to that number? Many advisers suggest setting aside 10% of your annual income is a great place to start. If you can afford that, that might be a good place to begin! But if you need to start smaller, that’s perfectly fine! 10% can be something to work up to.
Start an IRA
Once you have savings, what should you do with them? Well, if you don’t have a 401(k) with work or have already maxed it out, you can start an IRA. You can deposit up to $6,000 annually into an IRA. This money will grow without you having to even think about it. You can even set most IRAs up so they deduct from your checking or savings automatically.
Common mistakes are making shaky investments, not having a savings account soon enough, and over-spending. Always carefully consider what you’re doing with your money and who you take advice from. If someone’s best financial advice is “don’t buy a latte,” you might want to look somewhere else for advice. Unless you think the $20 a month at Starbucks is really what is going to crush your dream of financial freedom.
Also! Talk to people about your retirement plan. Ask retirees that you know, talk to your friends and family about retiring, and also your employer! There might be benefits at your job that could help you that you don’t even know about!