How to Start Saving for Retirement
November 8, 2022
It is essential to know how to start saving for retirement efficiently, to have a good nest egg to enjoy when you leave the workforce. Saving for retirement is every adult’s eventual goal. Nobody wants to work forever, and your ability to work will decline as you age. Luckily, most people pay into Social Security and thus have a safety net to look forward to. Unfortunately, Social Security is rarely enough to fund a comfortable retirement. It creates a gap you must fill with your own savings, but developing your retirement savings is easier said than done.
Start Saving for Retirement and Secure an End Goal
If you’re unsure about your retirement strategy or how you’ll save to achieve it, you can start by following these four steps.
Establish a Clear Goal
One of retirement's first and most essential rules is simple: establish a goal. You can’t meet a goal if you never identified it in the first place, so you must clearly outline what you hope to achieve when you retire. This goal should specify how old you want to be when you retire, how much monthly income you want, and what other changes you may pursue when you settle into retired life. Write these goals down so you can revise them and add to them.
Set a Monthly Rate for Savings
Once you’ve identified the details of your ideal retirement, you can develop a specific figure for savings that will help you meet these goals. Many experts say that a comfortable retirement requires savings of at least ten times your current salary. If you decide to aim for this figure, calculate how much it will be — for example, $400,000 if you earn $40,000 annually — and divide that number by the number of years left until you retire. If you are 25 and plan to retire at 55, you have 30 years to save $400,000, which is about $13,333 per year or $1,111 per month. Figure out a plan for setting aside this much every month.
Open a Retirement Account
Finally, you need to establish a retirement account that will allow you to set aside your savings securely. There are many types of retirement accounts, including the following:
- 401(k)
- Solo 401(k)
- Roth IRA
- SEP IRA
- Traditional IRA
Determine which of these best suits your savings goals and retirement plan. Each type of account has its own benefits and drawbacks, so if you’re unsure which one is right, you may benefit from consulting with a financial advisor.
With your savings in a retirement account, you can then proceed to invest the funds. Some of the most popular investment options for retirement accounts include multi-year guaranteed annuities, mutual funds, exchange-traded funds, and index funds. You should thoroughly research your investment options to determine which is the best. You may also enlist help from a professional investor who can manage your account and offer advice.
About 1891 Financial Life
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Our portfolio is extensive, ranging from various life insurance policies to our MYGA to support your financial needs no matter what stage of life you’re in. For more information, contact us at (855) 804-7424.
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