Top 5 tips for saving for retirement
How much money should be saved for retirement? Even though your senior years may seem far off, a thoughtful retirement plan might spare you from having to cope with unanticipated financial problems once you’re ready to stop working.
Putting money aside for retirement may be challenging. It could be unsettling to imagine things like major purchases or medical issues occurring decades from now.
However, having a clear understanding of your particular retirement requirements will help you create a detailed financial strategy for your 60s, 70s, and beyond.
Start saving for retirement
Decide on and start working toward a retirement goal
According to a recent survey, 55% of non-retirees already have a retirement account, compared to 25% who have no retirement savings. The average retirement savings for Americans in their 30s was $38,400, as opposed to $10,500 for those in their 20s.
If you fall into one of these age ranges but haven’t started to think about retiring yet, don’t panic. Never too late to start financial planning.
How much money should you specifically have saved for retirement? According to the “80% rule,” you should be able to live off around 80% of your pre-retirement income after retiring.
This means that if you earned $100,000 per year before retiring, your post-retirement income should be in the range of $80,000.
A financial counselor at a bank or credit union, such as Texas Tech Credit Union, may also be able to help you determine how much money you should set aside each year to accumulate a decent nest egg once you retire from work.
If you have a certain retirement goal in mind, you’ll know exactly how much money you need to save each year.
Pay off your debt and follow a budget
Excessive debt may hurt your savings. By using any additional funds toward your credit card, personal, auto, or student loan debt, you can optimize your retirement savings.
Making a budget is another effective method for saving money. Make a list of all your current expenses, such as credit card, mortgage, insurance, grocery, and utility bills. Make a list, then look for places where you may reduce spending. You might find it useful to reflect on the following issues:
- Are you spending more than you are making?
- Exist any smaller vehicles that get better gas mileage than the ones you now drive?
- Can existing credit card debt be consolidated with a lower monthly payment and APR?
- Do you possess the skills necessary to negotiate a reduced student loan interest rate?
- Could you possibly save money on gas by taking public transportation to work a few times per week?
- Can you make a little extra money each month by cutting back on unneeded expenses like cable or streaming media services?
- Can specific foods or personal care items be replaced with generic brands?
Contribute to your 401(k)
If you are eligible for your employer’s retirement plan, make sure to contribute the maximum amount per year that will be matched.
You will be able to save more money by doing this without having your take-home pay much reduced because you will be able to make pre-tax contributions from your paycheck.
If you haven’t already, you need to start contributing to your retirement account right soon. Make sure you receive the advantage of your employer’s match by learning the maximum contribution that they will make.
As an illustration, some businesses will match up to 5% of an employee’s salary or 50% of their contribution. Although it is technically free, that is a significant amount of money. Make certain you gain from it.
- Make catch-up contributions if you are above 50
Those who are at least 50 at the end of a given calendar year are eligible for yearly catch-up contributions, which let people contribute more than the annual 401(k) contribution cap. The current catch-up amount is $6,500. So, if you’re 50 or older, you can contribute a total of $26,000 in 2021 or $27,000 in 2022.
Spend less money
There’s a reason why financial advisors tell their clients to “pay themselves first.” Make sure that your monthly savings grow by having your retirement contributions deducted automatically from your paycheck. This will also prevent you from spending money that you should be saving.
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