Start Saving For Retirement Now

June 14, 2010

Many people think that because of current expenses and priorities, putting money away for their future retirement isn’t something they can afford. That kind of mindset is based on an assumption that it will cost a lot to create a retirement savings account. Here is some advice about getting started now to achieve your retirement goals.

The important thing to remember about retirement savings is that the earlier you start, the less you have to put away to reach your financial goals. Sometimes what is needed is a strategy to help counter our natural tendencies to spend more than we need or have.

Knowing that you need to start early is the first step. Adopting a strategy to help deal with a behavioral mindset bent on spending is the next step.

First let’s examine the second part of the plan – changing the behavioral mindset. Adopting an “out of sight, out of mind” approach to managing extra money is a good strategy for saving. If you believe it isn’t possible to save because your current budget utilizes every cent of your income, start planning a way to avoid accessing extra or unplanned money.

  • For example, if your company all of a sudden decides to put in place an annual 2% increase, you’ll have 2% more in your pocket that first year. But your household budget is based on your pre-raise salary.
  • An “out of sight” approach requires that you do not change your budget and put all or part of that “extra” money away into a savings account – not your spending account. You’re going to treat that “extra” money it as if you never saw it.
  • So let’s say you take home $48,200 year. Your new raise will give you an extra $964 a year. If you put your annual 2% increase away into a retirement savings account — something like a mutual fund account with an 8% return on your investment – you could in ten years potentially grow a savings account valued at almost $80K.
  • The key is to start saving as early as possible by putting aside, on a regular basis, money that you won’t miss because you don’t depend upon it.

  • Here’s a scenario that really illustrates the benefits of starting early. If you make the decision at 25 years of age to start saving for your retirement and put away $2K a year for 40 years, you could grow a savings of potentially $560K (assuming an annual investment return of 8%).
  • If you were to wait until 35 years of age to start putting away the same amount of money into a similar savings instrument (with an 8% annual return) you could expect to have about $245K if you decided to retire 30 years later at 65.
  • That’s nearly 50% less than the amount you would have had if you had started saving earlier.
  • With this kind of information, you now know the potential you have for creating your own financial nest egg. The key is to identify your savings strategy and start as soon as you can.

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