How To Start Saving For Retirement
Retirement seems so far away, and then all of a sudden the kids are off to college and you are looking at beach homes. The years can slip away from you, and if you don’t have a retirement plan, then it can be difficult to live comfortably as you age. Start as early as possible, with whatever funds you have. You don’t have to have a nest egg squirreled away to get started with your investment savings. There are several different saving strategies that you can start using today to get a jump-start on your retirement.
- Savings Account: You’re probably the most familiar with this one. This is available at every bank, and it’s an excellent way to start saving today.
- IRA: This is a way for you to invest your money in Mutual Funds that you are able to control. An IRA gives you more flexibility and control as opposed to a 401K. You can choose to either have the money taxed before you put it in the account, or afterwards, when you pull it out to use it. You’re able to switch Mutual Funds and distribute your money as you see fit through organizations like Vanguard.
- 401K: A 401K is set up through your place of employment, and offers investments in specific Mutual Funds. The main benefit to the 401K is that your employer generally offers a match program. Whatever you put in the fund, they will match, doubling your savings. The tradeoff is the flexibility and control over where your money is placed.
- Stocks: These are the most volatile, but can give you the most reward. It’s advised that those who are under 40 invest heavily in stocks. If you have a stock that goes belly-up, then you have the time to recover from it. It’s wise to spread out your money into several different stocks, just incase one stock drops dramatically.
- Bonds: These are most stable, but don’t grow as quickly as stocks. It’s best for those over 40 to invest more in bonds. It’s a safe bet that you’ll see an gradual increase to your savings.
- Equity: This comes in the form of property that you own. It can be a house, land, vehicles, jewelry, paintings, etc. These are things of value that you have acquired and are able to profit from when you decide to sell.
How Much Should I Save
The general rule of thumb is to save 10% of your take home pay. You can divide that into different segments for different goals. Put 3% into your retirement, 5% into your savings for vacations or emergencies, and 2% into high yield stocks. Depending on what you are able to live without, you can adjust those numbers to fit your lifestyle. Always, always, always, live below what you take home.
When Should I Start
It’s never too early to start saving for retirement. Everyone can start by setting aside a few dollars in a savings account until they have enough to buy a mutual fund, or a few stock options. With a 401K, you usually don’t need to have a sum of money ready to hand over. You can set it up with the employer, and it’ll immediately start coming out of your paycheck, and into your retirement fund.
Be successful in your saving initiatives by making it an automatic withdrawal. When you don’t have to think about it, you won’t forget to set aside money. You’ll also be able to save even more because you won’t have to make a choice every month. It’ll be done for you. Retirement is a must for everyone. Don’t wait. The earlier you start, the more money you will have by the time you are ready to retire. If you play your cards right, you may even be able to retire earlier than you thought.