Planning and saving for retirement is something many people like to procrastinate on. It’s like exercising. You know you should be doing it on a regular basis, but going to the gym and sticking to an exercise routine can be quite hard and unappealing. It’s much easier to make excuses and put things off.
It’s easy to see why. You have responsibilities that need your urgent attention, which often cause you to neglect the equally important task of planning and saving for your retirement. Complicating the matter are wages, which have stagnated in recent times, and there’s the cost of living that continues to rise year after year.
For many people, the 401(k) workplace-savings plan, which is supposed to supplement traditional pensions, has become their sole or main retirement-savings solution, but some financial experts say that wouldn’t be sufficient.
If you have reached midlife and still have not saved for your retirement, getting started can appear daunting. Fortunately, it’s never too late to save for your retirement. Here are some tips that will help you start, grow and eventually boost your retirement savings.
1. Start a rainy day fund and pay off your debt
One of the biggest expense competing with most people’s retirement savings plans are unexpected costs like house repairs or emergency medical expenses. To address this, wealth managers suggest that you start a rainy day fund, which is at least six months’ worth of your monthly living expenses. You can start by setting aside a small portion of your income, then increase it after a few months. This should be your top priority.
For you to be able to truly save for your retirement, you should also start increasing your total net worth. That’s your total assets less your liabilities. You can increase your net worth by paying off your debts. Financial experts advise that you prioritize paying debts with the highest interest rates to make the most impact in reducing your liabilities.
2. Automate your savings and invest your money
As you reduce your liabilities, begin saving for your retirement. To make it more manageable, start by saving at least 10% of your income. Then increase it in increments over time.
If your place of work has a 401(k), make sure you contribute to it. Some 401(k) plans offer an auto-escalation feature that automatically increases your contribution after a set period of time. If your company doesn’t have 401(k) plan, find a low-cost brokerage firm and ask about opening an individual retirement account.
If have extra income or receive a promotion, invest the money in stocks and mutual funds, but be sure to seek expert advice and guidance especially if it’s your first time. Start small and do your homework.
3. Hold off retirement as long as you can
The logic here is simple. The longer you work, the more money you can save. Plus, it keeps you from filing for Social Security benefits for a little bit sooner.
It’s important to note that for every year you delay filing for your Social Security payment, you increase the amount of monthly benefit you receive in the future. For example, if you file for benefits at the age of 62, which is the earliest qualified age, you only qualify for an annual payment of $18,000. Compare that to $31,680 in annual benefits if you availed at the age of 70. If you can’t wait that long. The good news is that even if you delay your retirement for just a year, that would be sufficient to boost your Social Security income by as much as $1,200.
According to some studies, starting too late and saving too is to number one regret of most retirees. Don’t make the same mistake. Act now and stop worrying about retirement.