4 Reasons to Save for Retirement and How to Get Started NOW
Retirement. Does that word invoke worry in your mind?
Retirement may seem like nirvana for some, and others see it as something they don’t need to care about yet or something they dread. How is it possible that something we’re supposed to look forward to can evoke such different reactions? Because some people aren’t prepared.
In a survey released back in August of this year by the Federal Reserve, almost a third of non-retired U.S. households reported having no retirement savings or pension, including just under 20 percent of households aged 55 to 64.
Let’s be clear right now: planning, saving and working toward retirement isn’t just for those 40 and older; it’s something you need to prioritize throughout life for these reasons:
Who will if you don’t? You alone are responsible for saving for your retirement.
Compound interest- The sooner you start saving for retirement, the better. For example, if you start saving at age 20 and plan on retiring at age 65 with $500,000 for retirement, you’ll need to set aside $2,350 a year in an account earning 6 percent. If you wait until 35, your yearly contribution nearly triples to $6,325 in order to hit the same goal.
Government programs are uncertain- both Medicare and Social Security are struggling right now, and barring a major overhaul, there’s a chance those benefits will be slashed by the time you retire.
Retirement is for living comfortably- it’s better to be more frugal now while you’re working so that you can relax and live a comfortable retirement.
“Okay, so how do I get started?”
Set a budget- this gives you a better idea of what you can save every month and puts limits on your spending.
Reduce recurring bills- can you have a lower data plan for your phone or live smarter to reduce your utility bill every month? If so, do it and stow away your savings.
Prioritize your purchases- before any purchase, even for necessities, ask yourself if you really need it or if you can get it for less somewhere else.
Open a Roth IRA- Roth IRAs give you a place to stash money for retirement that allows it to grow with compound interest. Roth IRAs also tax contributions you make now, but withdrawals are generally tax-free in retirement (consult your tax advisor).
Take advantage of a 401(k) through work- if your employer offers a 401(k), start contributing to it. This is especially important if there is any kind of match from your employer involved.
Saving for retirement doesn’t have to be hard, but it should always be a part of your financial plans whether you are 25 or 55. If you need help planning for retirement and setting aside money, the financial professionals and numerous investment products* we offer can help. Visit www.mylsb.com/investments for more information. Come see us today!
*Some Investment products are Not FDIC Insured, have No Bank Guarantee, May Lose Value, are Not a Deposit, are Not Insured by any Federal Government Agency.
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