How to Begin Saving for Retirement

Written by , May 22, 2013

How to Begin Saving for RetirementFor a lot of people, saving for retirement is one of those things they know they should be doing, but for a variety of reasons they’ve never really seriously addressed the issue. Unfortunately, this has led to many being unprepared. A recent study concluded that 57% of U.S. workers have less than $25,000 in total household savings and investments (excluding the value of their homes). That represents a significant increase over the percentage of US workers (49%) who had so little saved in 2008.

Once one understands the importance of saving for retirement, the next question may be “ok, so what’s the best way to get started?”

Here is some retirement advice in response to that question.

  • Start Now. The most important element of a successful retirement savings strategy is that it takes time. If you wait until 10 or 15 years before your desired retirement date, then it’s extremely unlikely that you’ll be able to save enough. On the other hand, by starting very early in life and developing consistent retirement savings habits, consumers stand a much better chance of meeting their retirement goals.
  • Make Retirement Saving a Priority. Unfortunately, some people have developed a mindset where they view retirement saving as something of that should only be done when there’s extra money available in their household budget. Unfortunately, this mindset is a sure path towards failure. You must make saving for retirement a priority in order to succeed.
  • Start Small. One psychological hurdle that some people face is that they think they need a significant amount of available in order to start their retirement accounts. Some hear that the annual contribution limits for IRAs is $5,500, and think that they need to save that amount this year and, worse yet, that they need to save it all at one time. Nothing could be further from the truth. There are many discount brokers and local banks and credit unions that will let you start an IRA for $500 or even $100. If that’s all you can genuinely contribute right now, then start with that.
  • Make Saving a Habit. One sure way to succeed is by making regular and steady progress toward your retirement goal. Come up with a plan to save a small portion of each and every one of your paychecks and it will be easier to save as much as possible compared to waiting until you have a big amount of cash ready to contribute all at once. For example, every $20 you can save from your weekly paycheck will result in an extra thousand dollars of contributions over the course of a year.
  • Automate Your Retirement Saving. If your employer offers a 401(k) plan, you can have your contributions automatically deducted from your paycheck and deposited into your account. When your contributions are automatically made, you don’t have to resist any temptation to spend the money instead – it’s already contributed before you have the opportunity to. Similarly, use direct deposit programs to have part of your paychecks contributed to your IRA if that’s your preferred retirement savings vehicle.
  • Don’t set yourself up for a situation where you can never afford to retire. Follow the steps above to begin your retirement savings in the best possible way.

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