Savings for retirement does not have to be something you start when you get to 25, 30, or 40. It’s never too early or too late to start saving for retirement. The time to start saving is right now.
Retirement should be the top priority for every individual.
Many people aspire to do everything during their retirement that they were not able to do due to work commitments. You may want to go on holiday tours or a luxurious life. Leading a dream lifestyle post-60s largely depends on your retirement savings.
The median total household savings for retirement in America across all workers is $93,000. (Source- Transamerica Center for Retirement Studies)
You would agree that this is not enough. Don’t panic. No matter what your present age is, it is never too late for planning retirement finances.
Wondering, how much savings should you have for retirement?
Everyone needs to have a lifetime comprehensive savings plan that encompasses long-term and short-term goals.
Emergencies: Life happens. We all have to face unexpected scenarios at some point. Replacing a faulty washing machine, health complications, and unemployment, are some common instances. Emergency situations urge the need to have some cash in hand ready.
Others: This is where people save money to fulfill their dreams- home renovation, vacation in Capri, etc.
Saving for emergencies and everything else is easy to accomplish with short-term plans. So these savings may go parallel with your retirement plans.
Considering the substantial amount, retirement planning involves setting practical savings goals and a flexible investment portfolio. Hence, it is a lifelong process for many. Having a budget planner makes it a lot easier for one to accomplish by keeping track of finances every month.
7 Proven Tips to Boost Your Savings for Retirement
#1. Set Realistic Savings Goals for Retirement
The first step to financial planning for retirement is goal setting. While doing so, you need to consider some vital aspects-
- The time you have for the savings
- Research various investment products
- How to balance the retirement plan with other savings, expenses, etc.
#2. Start Early to Reduce the Burden of Savings for retirement
Since you need to save as much as possible, it is better to start growing your retirement savings from an early age. Take advantage of the compound interest to generate more money from your existing assets.
#3. Save More on 401(k)
If you are eligible for the employer-funded 401(k), it is worth making most of this opportunity. You can do whatever with the accumulated amount after retirement.
The maximum amount you can contribute to 401(k) as set by IRS is up to $19,500 for 2021 and $20,500 for 2022. The upper cap is $26,000 for 2021 and $27,000 for 2022 for employees who are 50 years or older.
#4. Get Tax Benefits with IRA to save more for retirement
Employees aged below 70½ years and who earn a taxable income can create an Individual Retirement Account (IRA). The best part is…flexibility to invest in financial products of choice, invest simultaneously with the 401(k), and qualify for tax benefits.
#5. Invest More with Catch-Up Contributions (50 years and above)
My finance advisor recommends contributing to savings for retirement by age. Aiming to save 15% from the age of 25 years can help you save as much as $1,600,000 for retirement.
In the current economic scenario, this may not be possible for all. However, you can do much if you are above 50 years old.
Employees 50 years or older can contribute an additional $1000 to 401(k) and IRAs. Even if you haven’t saved enough before, there is still enough time to grow your funds.
#6. Have a Monthly Budget Plan to Control Spending
Often uncontrolled spending poses a hindrance to savings plans. There are innumerable hacks to cut-down your monthly expenses. A lunch box from home, canceling unwanted subscriptions, and planned purchases from eCommerce stores can save you several dollars every month.
Using a budget planner tool can be helpful to allocate funds for various necessities based on your monthly/annual income.
#7. Delay Receiving Social Security Retirement Benefits
The minimum age to start collecting social security payments is 62 years. If you can wait longer (70 years), there is ample scope to receive additional monthly benefits. There is an added advantage for the spouse to receive survivor benefits.
Bonus Tip: Reserve 50% of Your Extra Money
Did you receive an appraisal?
Whenever your income rises, consider saving half of it for retirement. This may not be possible for many. But instead of hitting the ‘Buy Now’ button for a limited edition watch, you can put the amount into retirement savings.
Key Takeaways; saving for retirement
You need to start planning a budget to manage savings for retirement.
Professionals in the private sector who don’t have defined-benefit pensions (funded by the employer), have to bear the responsibility of retirement planning.
Due to the hefty amount, financial advisors recommend starting a savings in the 20s. It’s ok if you are saving 15%-20% of your annual income for retirement. Anything is always better than nothing. Here are 10 proven tips t0 save more.
The retirement savings goals vary from one individual to another. Determine your desired lifestyle and standard of living.
Having a flexible retirement portfolio is always a wise decision for long-term financial investments. It allows you to update your savings plan depending on the changing market scenario.