Saving for RetirementSubmitted by Shoreline Financial Services of Arizona LLC on August 5th, 2016
Saving for retirement is often looked upon as a burden, but once you reach the age of retirement it quickly becomes a blessing. Looking for ways to keep your lifestyle in retirement can be difficult to navigate. Pension and compensation packages offered by companies that gave a percentage of the employee's salary is something that people used to be able to count on. Along with Social Security benefits, that would be enough to cover the cost of living. Unfortunately, neither of those options is any longer a viable lone income for retirees.
It should seem obvious once you ask the question why you need to save for retirement as early as possible, but the truth is that most people don't think too much about it, simply putting it out of their mind as a concern for the future. Sadly, this is not the case. The sooner you start working on this the easier things will be, and the better off you'll be in the long run. No one else is going to take care of this for you, it's up to you to make sure you'll have enough money to live your life the way you want to.
It used to be the case that many employers would offer you a pension plan that would take care of you when you were older and ready to stop working, but these days these plans have been replaced with a 401k account option. These accounts are retirement savings vehicles that allow you to put your contributions into this one account and invest in a variety of ways (stocks, bonds, money market accounts, etc) in a plan that you choose. Your employer will offer you several different plans to invest in, often varying by level of risk, and you can choose one and make adjustments as time goes on. These accounts have a number of benefits compared to other saving options including high yearly contribution limits, contribution matches from your employer, and tax benefits.
Today, it's up to the individual to provide a way to create a comfortable retirement and make sure their assets and income are handled properly. Learning how to save effectively can be a difficult thing to achieve. Finding a certified financial planner is a great step in the right direction, and other steps toward this process can also make sure you have a fun and relaxing future after your working life end.
Making a plan
Starting to save for retirement means looking at how much it costs you to maintain your assets and lifestyle. The U.S. Department of Labor recommends that you start by determining your net worth (the total value of your assets minus the value of your debts). You'll want to create a nest egg that can continuously deliver what you need to sustain items like your house, car, property, and any other expense you currently have and plan to carry over into your retirement. Having this income after you stop working is an important part of your retirement plan.
Saving Money Now
When creating a retirement plan you need to look at your current budget and put together your expenses and income. If a significant portion of your monthly income is being spent on credit card debt, take an aggressive approach toward paying it off. While being proactive toward debt to make sure you don't have any toward retirement, do not spend what you've been saving. Cutting every expense you have is not something that you would absolutely need to do, either. Start making coffee at home a few times a week instead of going to your local coffee house. Cutting small things here and there can add up after time and make long strides to achieving a balanced budget. Pretend that the money that you save doesn't exist until after retirement. Staying out of your savings account is the best way to ensure it stays healthy until you need it.
If you're a home owner, then you have both a huge debt and a valuable asset. It's always a good idea to keep an eye on interest rates. If they begin to fall from what you currently are paying, considering financing your mortgage to get a lower rate. The extra money that you were using to pay off your mortgage with the higher rate can now go toward your retirement savings or paying off other outstanding debts you may have in order to get rid of them before you retire. Since credit cards almost always having a higher interest rate than a home mortgage, it may be a good idea to use the extra money you saved from refinancing to pay off your credit cards. Paying off your mortgage before retirement is one of the best things you can do with it. The recurring monthly expense of paying a home mortgage will result in an instant and quite large increase in your income, which is something that will come in handy when you stop working.