Saving money for retirement. Retirement is a word that is farfetched in the mind of young people in their 20s and 30s. They’d instead save up to travel the world and buy expensive items than to save for something that is 30 to 40 years away. When you look around at people who have retired with no savings, it becomes an eye-opener.
There is no shortcut in terms of saving money for your retirement, not unless you are rich, or you come from wealthy parents or ancestors that can finance even to your grandchild. If you don’t want to end up like the penniless retiree, you know, you have to start saving now.
Here are three steps that he recommends:
Set a goal for your retirement savings.
To come up with the numerical figure for your retirement saving, picture the life you foresee in the future. Would it be sitting by your front porch looking at the sunset by the beach? Or perhaps, do you see yourself traveling around the world to discover every beach and mountains, taste various cuisines and meet new friends? Whatever it is, the amount you have to save will be based on the lifestyle you wish to pursue.
Save 10 to 15% of your income.
Ever heard of the phrase, “save to invest?” Typically, people save money in the bank for emergency purposes but never to invest. While there is nothing wrong with saving money in the bank, but by investing it, you can earn twice or more compared to the little interest offered by the bank. Small sacrifices will pay off later.
Start Small. The key to saving is consistency, save that 15% of your income now rather than splurging on non-essentials like premium channel subscriptions you rarely watch.
Pay your debts first. It is not practical to start investing your money when you have bills stack up that you have to settle early. Learn to strike a balance between the two, but your priority is to be debt-free, so you would have enough money to fund your retirement.
Then pay yourself. Some saving options that you can explore are 401(K) match and Roth IRA.
Going beyond 15% – find other investing options
Open a separate bank account. Both IRA and 410(k) does not allow you to withdraw the money before the retiring age. Thus, getting a different bank account that will enable you to withdraw anytime is recommended.
Invest in other options such as real estate, stocks, or mutual funds. For people looking for ways to earn passive income, these are three of the options that you can invest in. Not only will it increase your savings, but it can still provide you with additional income even after you retire without having to lift a finger.
When you look at saving money for your future, it does not look too daunting anymore. Especially if you picture the life you want to retire to, doing precisely what you want without worries and your small sacrifices along the way will return you a hundred folds.