When it comes to saving for retirement, it’s a lot like watching your weight and exercising every day. You know you need to do it, but it’s a lot harder to get it done. You probably have a lot of excuses and even some valid reasons that keep you from setting aside money for your future. Whether you’re still in your 20s and are just starting to think about retirement or are quickly approaching 50 and in a bit of a panic, it’s not too late to make some changes that can get you on the right track.
How to Save Money
Forbes states that even if you don’t have a complete plan in place, just making the commitment to start saving is the first step. You may find that you initially need to start small and work to increase the amount of money you save each month.
According to the Department of Labor, the amount of money you need to set aside varies on several factors, including your current age and how close you are to retirement. A good rule of thumb is that you will need at least 70 percent of your pre-retirement income to live comfortably when you retire if you make $100,000 or more, or 90 percent of your pre-retirement income if you make $100,000 or less.
Investing Money for Retirement
If the company you work for offers a 401(k) plan, sign up for the plan and contribute all you can. If your company does not offer a retirement plan or if you’re self-employed, you still have two easy ways to save: either through a traditional Individual Retirement Account (IRA) or a Roth IRA.
Both accounts allow you to contribute up to $5,500 a year (more if you are over the age of 50), and both will provide you with tax advantages. However, you can deduct the contributions of a traditional IRA on your yearly tax return.
Spending the Money
You may think that it’s hard enough figuring out how to save for retirement and how much you’ll need, but it’s often even harder to figure out how to spend it. Preparing a budget for your expenses can help alleviate some of this worry. Also, knowing what your fixed expenses are can help take away the concern that your money is going to run out. Once you know what you’ll need to keep going month-to-month, you can start spending money on hobbies and other pursuits without the worry.
Overall, the saving for retirement that you start today, along with the investment you make with your money, is what will provide you with the ability to have the life you want to live in your retirement.