The retirement age seems to keep going up and up, but with some intelligent savings, many people can retire precisely when they want to.
When we talk about saving for retirement, the best time to start saving is right now, or more than ten years ago (depending on your age).
It is estimated that most people don’t know how much they need to have set aside for retirement, and with inflation, it can be tricky to know for sure.
Photo Source
Typically you are recommended your retirement income should be about 80% of what you earned yearly until your chosen retirement age. So if you have been making a round of $100,000 a year, you’re going to want to set aside $80,000 for each year of your retirement to live at roughly the same standard.
So how can you prep your finances to make sure you can have an enjoyable retirement?
Set a Goal
Setting saving goals is something that we need to do throughout life anyway, but when it comes to your retirement, you need to know how much to save – and make it last. The above example is relatively high since the average income in the US in 2019 was around $31,133.
Something that is worth considering is, do you plan on traveling? Will you sell and downsize your home? Do you have multiple pensions?
And a factor you might consider for your family is, have you got the proper insurance to take care of you when you die? Protecting your loved ones after you die should be in your goal planning and is possible with term life insurance.
Once you set your total financial goal, you then need to work out how much of a % of your yearly income should go into your retirement savings. The later in life you begin to save, the higher the percentage is going to be.
Retirement Account
If you are simply leaving your savings in your regular account, it can be all too easy to eat into them. Instead, it is a good idea to open a retirement account.
Some accounts are better than others when it comes to retirement accounts, and while you can open a standard savings account, there are some government accounts that are designed for retirement savings.
These types of special accounts come with some tax advantages, which makes them worth considering.
Employer-sponsored retirement accounts, such as 401(k)s or individual retirement accounts, are the two basic forms of retirement accounts (IRAs). These regular and Roth versions of both types of accounts are offered. Both provide tax-advantaged growth of your investment funds, but you get to choose whether you want a tax cut now or later.
IRA
You might have access to a retirement account through your work; then, you can either choose from a Roth IRA or a Traditional IRA.
You must have taxable income for the year in order to contribute to these accounts. Roth IRAs have higher income requirements.
If you’re single, you must make less than $124,000, and if you’re married and filing jointly, you must make less than $196,000 to contribute the maximum amount to a Roth IRA.
Employer-sponsored retirement accounts
Some companies offer this benefit to their employees, and most people have heard of the 401(k). You might have access to other plans like the 457(b) or the 403(b), SIMPLE IRA, or the SEP-IRA.
What makes these accounts so brilliant is that they often have an employer contributions match. So effectively, with these, you can double your money, potentially reducing your time to retirement.
Automation
There is no doubt about it that saving for years can feel like a lot of effort. So what can you do to help lessen the manual work?
Automation of your savings means that you will not have to move your money from one account to another. Instead, you can set your saving parameters, and each month or week, the correct amount will be put into your accounts.
If you like the idea of also having some smaller saving pots, there are automated saving applications too.
Smaller side savings can be used to top up your retirement accounts at a later date or to cover any emergency expenses, so you don’t need to dip into any other savings.
Here are some of the most used, reviewed, and ‘best’ savings apps to make automatic savings a snip.
- Acorns
- Digit
- Chime
- Empower Finance
- Qapital
- B of A Keep The Change
- Plum
Each of these automated saving options has a range of different benefits, so you’ll need to read reviews to deice which is the best option for you. What makes many automated saving apps brilliant is that they work on an algorithm that tracks your income, your average spending, and your upcoming bills. It then only saves what you can afford.
You can typically hook up your main bank account and enjoy most of the perks on a free account.
Spend Less Now
While you are looking at your financial future, it is a great time to look at your current financial standing. How much are you spending and where? Could you be trimming some of the expenses each month so that you could save more?
It is essential that you still enjoy your money, but when it comes to planning for the future, every little bit helps.
If you are looking for some of the best places to save money from regular bills, this post can help you: 5 Common Bills You Can Make Savings On.
Start Now
As mentioned at the start of the post, the most critical time to start saving if you haven’t already is right now. Take a look at what you have available right now, and even a few dollars can be the start of a fund that will help you enjoy your retirement to the fullest.
Keep in mind that not many people can save up thousands in a few short weeks and that every cent that you put into your savings is going towards a healthier financial future.
