This article on tips for building towards retirement is written as a result of the recent trend in the financial news. If you pay any attention to financial news, you’ve likely noticed the emphasis experts put on saving for retirement.
While opinions on how much you should have saved before you retire vary, everyone agrees that saving for your retirement early on is essential. But how do you put 10-15% of your income toward your retirement fund when it feels like you’re still living paycheck to paycheck?
In this article, we’ll discuss some tips for building your retirement fund no matter what your personal financial circumstances are.
Get started early on
If you’ve been holding off on saving for retirement, here’s a little motivation for you: according to Investopedia, the average 401k balance for twentysomethings between 20-29 is $11,800.
Setting up a retirement plan ASAP is important to jump starting your savings, but it’s not the only option to build your retirement. Heck, kids can save up their quarters from their lemonade stand profits if they’re so inclined.
The point is, whether you have an employer-sponsored 401k, an Individual Retirement Account, or just put aside $50 a month toward your retirement in a separate savings, any way you save up is worth it in the long run!
Keep in mind though, many retirement savings plans offer certain tax benefits which is a win-win for your tax bill and your retirement savings. If you need a little more guidance to help you plan out your retirement savings goals, take a look at these savings averages by age:
- Age 20-29: $11,800
- Age 30-39: $42,400
- Age 40-49: $102,700
- Age 50-59: $174,100
- Age 60-69: $195,500
Choose a retirement savings plan
As we mentioned before, there are many different ways you can start saving for your retirement. Here are a few of your options with a short description of each.
- 401k: A 401k is one of the most common and straightforward methods to save for retirement. 401k plans are offered by employers who withhold a certain amount from employee paychecks per month and put it into a savings plan for employees who opt in to the program.
- IRA: An IRA is an Individual Retirement Account which allows individuals to contribute up to $6,000 per year into their retirement savings. What’s more, IRAs offer tax deductions.
- Simple IRA: A Simple IRA is an employer sponsored retirement plan that’s designed for small employers to set up IRAs for their staff with less paperwork than a 401k account.
How about committing to regular contributions?
Whether you’re saving in a retirement savings account or just some change in a mason jar, it’s important to make a commitment to contribute to your retirement fund regularly.
It’s easy to forget to make a contribution when you have other wants and needs on your mind, but if you don’t continue to save up, you might not be able to retire comfortably, or at all. Use a retirement savings app to help you create goals, stay on track, and monitor your progress.
Employ creative savings strategies
If convention really isn’t your thing, you may want to take a look at some of the other ways you can start saving up for your retirement without having a 401k.
- Using your assets: Being a homeowner has many perks aside from having a space that’s all your own. Increasing your retirement savings is one of them. A reverse mortgage is one financing option that homeowners may employ. A reverse mortgage essentially uses the equity you’ve earned in your home and turns it into cash that you can use for your retirement fund. Obviously, there are many considerations to make when making such a financial decision—but this free reverse mortgage calculator can help clear up the confusion.
- Building investments: Another way you can build your assets and transform them into retirement funding is to build up your investments on the stock market. If you’re a beginning investor, you may want to enlist the help of an online stock brokerage firm to help you make sound investment decisions.
- Working part-time: If your retirement savings is lacking and you’re nearing retirement age quickly, don’t fret. Do your best to build your savings where you can and use this opportunity to try something new while making extra cash. There are plenty of fun part-time gigs for retirees—from camp hosts to museum educators.