Saving for retirement can feel stressful, especially when you do not know where to start. But it does not have to be – in fact, these five steps will get you well on your way to saving for the rest of your life.
1. The first, and perhaps most important step is to open a dedicated retirement account . If your employer doesn’t offer a 401(k), you still have plenty of options! Consider opening a Traditional or Roth IRA as your primary retirement savings vehicle, which is fairly simple to do and can be opened at most banks and credit unions.
2. Do your research. HOW you choose to invest can make a big difference in the returns you see over the course of your life. If your employer offers a 401(k) match, that’s free money that you should try to take advantage of! And having a 401(k) doesn’t preclude you from contributing to either Traditional or Roth IRAs. In fact, you can have all three!
3. Set up automatic enrollment. This just means that your retirement contributions are automatically deducted from your paycheck and deposited into your 401(k), which makes it much easier to save! To start, you can set the contribution at a lower percentage, and as your wealth grows, you can increase it over time.
4. Create a plan. You'll need to know how much money you need to enjoy a full retirement, and how much you need to contribute to your retirement account on a monthly basis to get there. If math isn’t your thing, there are a wide variety of free calculators available to help you figure out the numbers. Your employer will also access to financial advisors that manage your retirement plan, so they can also help provide guidance and advice.
5. Let the savings begin! Making good choices with your money is a process that takes dedication. When you receive raises or bonuses at work, consider setting aside a portion of the increase towards retirement. Try to avoid “lifestyle creep”, treat any increase in your income as an opportunity to invest in your future, not upgrade your lifestyle. You may also want to take steps to eliminate any high-interest debt you’ve accrued, like credit cards, and use that money to contribute more to your retirement account.
With retirement savings, starting small can lead to big results. The key is staying steady and committed to your goals. You’ll be amazed at how much you can put aside over time, and before you know it, you’ll be well on your way to your retirement goals.
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