Yes, You Can Start Saving for Retirement TodaySubmitted by Alloy Silverstein Financial Services, Inc. on April 3rd, 2019
Time certainly goes by fast. One day you’re interviewing for your first job and the next thing you know you’re a few short years from applying for Social Security.
While it’s never too early or too late to start planning for retirement, when it comes to retirement savings in the U.S., later seems to be the standard. According to RothIRA.com, only 56% of today’s workers in the U.S. are currently saving money for their retirement, and 38% of those currently saving have less than $10,000 saved. With one-third of Americans admitting that they have no retirement savings at all, it’s clear that many U.S. workers will reach retirement age with little to no resources to count on.
Reasons for this vary, from the disappearance of the company pension to the record number of families struggling from paycheck to paycheck, with retirement savings a distant priority. Millennials are also choosing not to save for retirement, choosing instead to pay off student debt, save for a home, or start a business. According to the Insured Retirement Institute, 42 percent of baby boomers have nothing saved for retirement, and even those that have saved don’t have nearly enough to survive on.
While retirement planning is more than simply putting money aside, it’s pointless to plan for retirement without available financial reserves. The good news is that whatever decade of life you’re in, there are relatively painless ways you can begin to build a decent retirement nest egg.
If you’re in your twenties, experts suggest enrolling in your company’s 401K or retirement plan, making sure that you save enough to be eligible for the company match. For those with federal student loans, consider signing up for the income-based repayment plan that caps payments at 10% of your current income, leaving enough left over to invest.
If you’re in your thirties, your salary has likely increased in the last decade, so now is the time to begin to ramp up your 401(k) savings. Experts also suggest that you become better acquainted with your investment portfolio. You may want to contribute to a Roth IRA, which offers tax-free distribution in retirement. Children often come into the mix in this decade, so saving for college is a must.
If you’re in your forties, you may want to become a touch more conservative with your investments, putting a bit more in bonds. This is also the best time to talk with a financial advisor, to examine your retirement goals, where you currently are, and what adjustments you may need to make to get you where you want to be.
But what happens if you reach your late forties or early fifties and haven’t started saving for retirement at all? Actually, there’s a lot of things you can do, according to Forbes.com starting with a simple cut in spending. Forbes also suggest that those in their 50’s look outside the box at ways to save for retirement; everything from a later retirement age to starting a side business. And if you haven’t already, open an IRA, which allows those 50 or older to contribute $6,500; an extra $1.000 a year from the standard contribution allowed.
Other than panicking, there are things that you can start doing today to help increase your retirement savings; Here are just a few:
- Consider downsizing. If you’re still holding on to that huge house, consider selling it and buying something smaller. While it can be difficult to let go of the home you’ve raised your family in, selling it will enable you to purchase a more affordable home with a smaller tax burden, less utility and maintenance cost, and the ability to put away some additional funds for the future. Besides, do you really want to still be mowing a lawn when you’re 70?
- Do a complete inventory of your spending and see where you can make cuts. Like the cost of maintaining a large home, you may find that you’re spending money on things that you no longer want or need. Get rid of them.
- Consider relocating to a more retirement-friendly city. It’s no secret that some cities are much more affordable for retirees than others. If you’re close to retiring, check out some affordable cities for seniors.
- Continue to work. If you love your job, why not just continue to work? Unlike 50 years ago, when companies routinely phased out their older workers, many companies today value the experience and work ethic that baby boomers bring to the table. Putting retirement off for five years can boost your retirement funds tremendously, particularly the amount of Social Security you will receive.
- If you’ve already retired, consider going back to work, even part time. There is a tremendous amount of opportunities available for skilled workers, and you can even jump into the freelance game, working from home. It will keep you busy, bring in some additional income, and allow you to keep your mind sharp.
- Pay down your debt. This could be just as important as saving. Being debt free will provide you with much more disposable income per month, which can be placed in a retirement account.
- Speaking of retirement accounts, be sure to take advantage of the increased contributions offered by any available retirement plans. If possible, contribute as much as the current law allows. You won’t regret it.
While many baby boomers are facing retirement very differently from the generation before, having a secure income stream will allow them to have the things they desire, whether that’s starting a new business venture, or cruising around the world.
While you can’t go back in time and start saving earlier, If you start planning for your retirement now, you can still live comfortably. Take some time to determine the options and opportunities available to you and start planning the next phase of your life today.
Ronald Donato Jr., CFP®, MBA may be reached at 856.667.6228 or RDonato@asfinancialservices.com.
1. RothIRA.com What Are the Retirement Statistics? By Rebecca Lake. Retrieved from the RothIRA.com website on 3-30-2018 https://www.rothira.com/retirement-statistics
2. Time.com/money 1 in 3 Americans Has Saved $0 for Retirement by Elyssa Kirkham. Retrieved from Time.com March 30, 2018 http://time.com/money/4258451/retirement-savings-survey/
*This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets. This material was developed and produced by Advisor Websites to provide information on a topic that may be of interest. Copyright 2014-2019 Advisor Websites.