There’s no mistaking the importance of savings. We drive home the reasons behind why you need an emergency fund to cover things like car repairs, medical bills and other unexpected circumstances. But there is another type of savings account you should be encouraged to start and that’s for retirement.
For many young adults, saving for retirement is nothing more than an afterthought. With focus on kick-starting your career, buying a home or paying off student loans, there’s not much left to put towards retirement, and we get it. Yet, the typical thought “I can start next year” isn’t going to help you in the long run unless every year you miss out on saving you’re willing to put aside that much more. Next year you’ll probably run into other financial challenges, and still carry student loan debt. There’s always somewhere else the money needs to go—and you aren’t alone. Check out the infographic to see how other folks are doing at saving for retirement…
Crunch the numbers
So how much should you be saving to jump start an inspired, relaxed retirement? Most financial experts suggest aiming for at least 10%-15% of your annual pay. Amping it up to 20% is recommended if you’re able to do so, or playing catch up. You’re probably thinking that’s a lot of money and wondering why it’s necessary when you’re young and carrying other financial burdens. Well, the whole purpose of retirement savings is so that one day you don’t have to work for money, and can take advantage of your hard work before you’re too old to enjoy it. This is why the goal is to reach financial independence before you need it.
Retirement savings tools
Most employers offer a 401(k) or other retirement savings option. This is your best bet to make saving for retirement convenient and easy. The amount of money you choose to go towards your 401(k) is automatically transferred from your paycheck into the account before you get the chance to spend it. Added perks of participation in the program include a tax break on your contributions, as well as employer matching incentives. If your employer doesn’t offer retirement savings plans, consider an individual retirement account (IRA). Some people choose to participate in a 401(k) as well as open an IRA. Take advantage of all the savings account options available to you!
Face the music
Yes, saving for retirement is almost like adding another expense on top of your other bills. Student loans, car payments, rent, mortgages, credit card debt—they’re all getting in the way of dedicating money towards your retirement. Just because these obligations are keeping you from contributing that whopping 15% or so, it’s no reason to neglect your retirement completely. Luckily, saving even a little money can really add up if you contribute regularly. Consider your current financial responsibilities and how you can make it easier to save. Oftentimes this involves getting creative and reducing spending in other areas. Here are some tips:
Scale back your lifestyle—Yes, that is much easier said than done. We’re not saying you should bike to work instead of paying for gas or the subway, that is too big an adjustment. But, you could forgo the $5 lattes for office coffee, or pack your lunch instead of going out with co-workers. Think about how much you spend eating out and the extra cash you’d have by brown-bagging it!
Comparison shop—From weekly groceries to holiday gifts, you can find deals everywhere, you just have to take the time to look. You don’t need to turn into an extreme couponer, but you can buy certain items in bulk when they’re on sale or enjoy free shipping promos for online items. Make it a practice to follow in-store sales and online promotions on items you buy regularly, or gifts you’ll need in the future.
Consolidate debt—If you have multiple credit cards with balances each at a different interest rate, it may be time to consolidate. Not only will this reduce the number of credit card payments you make each month, you’ll be able to better manage your credit. If you’re a longtime account holder, there may be a low interest card available to you, or an attractive 0% APR offer on balance transfers.
Plan for your future
For someone in their 20’s or 30’s retirement savings may seem low priority. However, planning for the future now will provide a much more comfortable, financially stable lifestyle later. To learn more about budgeting, saving and charting your path towards financial freedom, contact RiverTrace today at (804) 266-2767.