Are you saving enough for retirement, maybe, well it really depends on which headline and article you read these days and how confident you are in the material. In a span of five minutes I read two articles. One told me baby boomers are working longer because they have not done a good job of saving and a second that said workers are saving more including older workers who are the most prepared for retirement. So, which is it?
I guess if these articles get someone, anyone thinking about retirement savings that’s a good thing. I’m not sure they will give you any clear advice or direction. When I talk retirement I do it from a savings standpoint. It’s tough to sell early retirement to three teenagers who haven’t even locked down their first part-time jobs yet. These are some of the things we discuss and maybe they can help you determine if you are saving enough or on the right path for retirement.
In order to save the most it’s no secret you need to dump debt as soon as possible. Debt just complicates things like savings and adds stress to your everyday life. During our debt repayment we temporally stopped saving towards retirement to allow us to take the extra cash and apply it to our debt snowball. This may not work for everyone, but for us it allowed us to focus on the number one goal of becoming debt free. Once debt free we had more cash to save for retirement, college funds and our emergency fund.
The sooner you can start the better, even if it’s a small amount at first. A small amount is still better than no amount. Automating this savings or paying yourself first allows you to condition yourself to live without the money from the beginning. Have you ever gotten a raise and began thinking of ways to spend the increase? Why not take a percentage of it or even all of it and save it. Doing this before you receive it and begin to spend it prevents you from missing it because you in theory you never had it.
Ever heard of this magical concept? Compound interest is the interest added to the principal of a deposit and accumulated interest of previous periods of a deposit. Well as you save compound interest allows that savings to grow even larger. Check out the rule of 72 for a very easy explanation. So the earlier you can start and the more you can save the bigger your savings has the potential to grow.
Take advantage of free money when you land that first job pay attention to the benefits information like 401K, pension, etc. Most companies offer a match up to a certain percentage and if you don’t opt in you could be losing out on 1-4% of your salary. When you consider starting early and compound interest that could be a lot of money being left on the table if you don’t take action.
Don’t be afraid to ask for help to assist you with your savings or retirement decisions. At the very least do you own research and homework and make an educated decision on where to save or invest your money. Sure there is no guarantee when it comes to investing, but this isn’t the Powerball and we don’t just pick our favorite number or kid’s birthdays and hope we get lucky. I recently had to make a decision on some of my new retirement benefits and I reached out to an expert for her opinion. Shannon helped me walked through the pros and cons to reach a decision.
I’m trying to impress these five areas upon my three teenage children when it comes to saving for their futures. I really hope they follow my advice and avoid ending up being a confusing statistic in a future finance article someday.
What other things should be considered when saving for retirement? How do you determine how much you save for retirement?