No matter what age you are you should be planning to save for retirement. When you’re in your 20’s retirement seems like light years away… why should you save for something that wont come for a while? Well the answer for that is to make it easier on yourself down the line so you aren’t struggling like many retirees today, and so you can kick back and enjoy your golden years a few years early. So how do you begin saving for retirement exactly? Well there are a number of strategies out there but depending on who you are, where you live, how many kids you have etc it could change. Instead lets look at a few general retirement saving tips to help you put together your own strategy.
First, start with a retirement date in mind. Even though it may change, try to have a date in mind of when you think you could retire. The reason you want to do this is because you need to know two things… the number of retirement years you will need covered and how many years you have to save that amount. By having a goal in mind, even if it may change, you make this planning much easier.
Next, determine how much money you will need to live comfortably once you retire. Now I know half of you are thinking “as much as possible” but try to put together a realistic look at what amount of money annually you will need to live comfortably. Try not to aim for the minimum, that way you give yourself some wiggle room should your investments go down the tubes.
Now that you know how much you may need, devise a savings and investing plan to meet your goals. Obviously you should save and invest as much money as possible for your retirement, but how much money is enough? Well in steps one and two we tried to identify the total amount of money you will need to live comfortably, now you need to figure out what combination of savings and investment vehicles will get you to that number.
Now if you start when you are younger you can take a much safer route as a small percentage rate of return every year really compounds well over 30 years, but if you started late you might need to be more aggressive to make up ground. Conversely if you are younger and decide to be aggressive you will have more time to make up any losses you incur on the way.
The type of investment depends on your personal financial situation so I won’t recommend any here but there are lots of options ranging from simple savings accounts to tax deferred investment accounts to mutual funds tailored for retirement funding. With so many options available there should be no reason you can’t find one that is right for your retirement goals.