Saving for retirement is one of those things that most people know is important, but many people find reasons not to do. Competing expenses and other financial obligations (both real and perceived) are common reasons why people are not saving enough for retirement.
Another reason that some people have for not saving enough is that since retirement is so far away, they don’t need to worry about it now because there will be plenty of time to save later. Unfortunately, the only surefire way to make sure you have enough for retirement is to start the process early. In fact, it’s never too early to start planning for your retirement.
Here’s some retirement advice on important steps you should take to start savings for your retirement immediately.
Starting Now Helps Develop Habits. Perhaps the most important aspect of retirement planning is to develop the habit of saving. If you have to think about whether you want to save for retirement in the coming year, or whether you can afford it, then you’re already facing an uphill battle. Making a commitment to add to your retirement savings with every paycheck will ensure that you do the right thing, rather than having to convince yourself that you should be saving. In some respects, the habit of saving is at least as important as the amount you save.
Starting Now Helps Build the Nest Egg. Of course, the more you can start saving now, the better. In a tax-advantaged account like a traditional IRA or a 401(k) (or even in a Roth IRA, where any investment earnings and games will be completely tax-free – even upon withdrawal), the longer those funds can work, the better. Individuals who make regular contributions throughout their 20s can expect to end up with a significantly larger nest egg than individuals who wait until their 30s (or later) to get serious about retirement.
Help Set Up an Account for Your Young Children. Any individual who has earned income can contribute to an IRA. If your children have any kind of part-time or summer job (or if you can hire them to do work for your home or family owned business), then they can contribute that money to a retirement account. Even just a one-time $2,000 contribution to an account at age 15 will grow to over $35,000 by age 65 (assuming a modest 6% return). As noted above, the more an individual can save earlier in life, the better.
Look at the Big Picture. When doing your retirement planning, make sure to look at the “big picture.” Retirement planning means more than just building up your IRA and 401(k) balances (although doing those things is certainly important). For example, some individuals will be close to retirement age just as one or more of their children are getting ready to go to college. In order to properly prepare, coming up with a plan to fund an educational (Coverdell) IRA (or other education savings vehicle) may be appropriate.
There are very few downsides or risks associated with starting your retirement planning and saving early in life. Because there is such an upside to doing so, it’s a course of action that everyone should pursue.
Tags: retirement advice, retirement planning, saving for retirement
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Saving for retirement is one of those things that most people know is important, but many people find reasons not to do. Competing expenses and other financial obligations (both real and perceived) are common reasons why people are not saving enough for retirement.
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