Quick tip, it’s never too early or too late to save money for your retirement. Let me run that by you again. It’s never too early or too late to save for retirement!
Many people spend their youth thinking, “I don’t make enough money to save”, or “I have plenty of time to think about that”. But time moves fast and youth is fleeting. In the blink of an eye, you’re on the wrong side of 40 with little or no retirement savings. Now what? Let’s dive into these tips to make your situation better.
Start saving now
Start saving now. It doesn’t matter if you’re 19 and this is your first job, or if you’re 59 and it’s your tenth job, start saving today.
There’s uncertainty about social security. Will it still be around in 30 years? Will the payouts be reduced? How much higher will they raise the retirement age? Try not to have your total retirement income rely on social security. Even a modest amount of savings can be the difference between a living with your kids and being independent.
If you are a younger worker
If you are a younger worker and you’re reading this, congrats, you are setting yourself up for a nice retirement, or maybe even an early retirement.
Don’t think you need to earn a certain amount to save. Even if it’s only $10 a paycheck, over the course of your working life, with interest it can add up nicely. Make use of your employer’s retirement savings plan and have the maximum amount you can afford deducted pre-tax each pay. If your employer offers a matching contribution as part of their retirement savings plan, try to tighten your belt and contribute as much as you can. That employer match is free money, get as much of it as you can.
If you are an older worker
Don’t give up. Just because you’re a late bloomer with retirement saving doesn’t mean you shouldn’t start now. Take a hard look at your monthly living expenses. Be honest with yourself about the amount you really need to keep your household running and also pay for a few self-care services or items. Cut the fat. Use the final number to understand how much of your paycheck you can save each month in your employer sponsored retirement fund. Set up automatic deductions with your employer. Having your employer shave the extra off the top will not only force you to live within your budget; but you will also get a tax break from having the funds removed pre-tax.
If you have disposable income
If after you’ve maxed out your contributions to your employer’s retirement plan, you still have disposable income…don’t dispose of it on mindless shopping, invest and save more. Consider opening a high interest savings account or IRA to get that extra cash working for you. Or if you’re open to learning to invest outside of your employer’s retirement plan, maybe try a starter account with a broker like Robinhood.
Start thinking about your housing needs
Live and move with intention. Think about how you would like to live in retirement. Rent or buy? House or condo? How much will that cost? Start working towards that goal.
If you are already in your 50s and your retirement nest egg is a little small, you still have an opportunity to design a lifestyle that works for you. Consider moving to a lower cost of living area to get more for your money. You may be able to save 50% or more on your housing costs.
Be debt free
When I speak of debt free, I specifically mean useless debt, like credit cards, car loans, and the like. Your mortgage is not included.
In retirement, you want to live financially light and as unburdened by debt as possible. Work on paying off credit cards, personal loans and car loans before you retire. Be mindful and stick to your monthly budget to avoid creating a revolving debt cycle of paying off debt and then creating new debt again and again. After paying off your debt, shovel those excess funds into your savings and/or investment accounts.
Put your health first
Health is wealth. That statement is true in more ways than one. If you’re in good health during your retirement, not only will you be able to enjoy your new freedom more, but you will also save money on doctor visits, prescriptions, hospital visits, etc.
Work on maintaining good health as much as you can. Get any chronic health issues under control. If you have diabetes, high blood pressure or similar issues, manage them more effectively. Watch your diet and weight, and take any required medications as directed. Try to keep yourself at a healthy weight and stay active. You don’t have to become a runner. But regular moderate exercise like a daily walk with your dog will meet your basic exercise needs.
Also, be sure to get regular annual checkups to get ahead of any issues. And don’t forget your teeth. Get regular check-ups and cleanings. Dental health is an important part of your overall health. Dental issues after retirement can be very costly.
Review your budget and savings
It’s important to do regular budget check-ups. It is so easy to have lifestyle creep where things like a new fancy coffee habit here, and another streaming subscription there, can quickly add up to an extra couple hundred dollars a month tacked onto your monthly budget. Every quarter review your spending and cut away any unnecessary extras. Lifestyle creep can seriously eat into your debt reduction and savings goals. So, keep your monthly budget in check!
It is equally important to regularly monitor your savings progress. Check your retirement and investment accounts. Are they earning at a rate that you will hit your retirement savings goals? Do you need to contribute more? Or do you need to change your investment mix? If you don’t feel comfortable making changes yourself, most employers offer a consulting service that can help.
Again, it’s never too early or too late to start preparing for retirement. The best day to start, is today!