If you’re staring down the inevitability of needing to eventually retire, you might be wondering how much you should be saving up. There are a lot of theories on this, but here are a few of the basics you’ll want to know as you’re thinking about your financial future.
Variables
There are a lot of variables when it comes to retirement. Do you want to retire at 65, or 67? How old are you now, and when did you start saving? How much do you have saved up? That’s before you even get into the macroeconomic concerns, like continuing inflation messing up the math for far-future retirements. Still, there are some basics you can keep in mind.
Rule of Thumb
A good rule of thumb would just be to save about 15% of your yearly income toward your retirement. If you’re already following something like the 50/30/20 rule, this is easy. Just make sure you’re sticking to your budget and making regular contributions to your retirement account!
Employer Match?
At the very least, if your employer offers a 401(K) and matches a percentage of your income, you should take full advantage of this. That’s free money that you can use in the future when you’re ready to retire. And it’s going to accrue interest for a long time. That’s all very, very good for you!
Why Use a Retirement Account?
You might be wondering why you should even bother with a retirement account. Why not just store the money in a savings account in case you need it? Well, savings accounts aren’t great for long-term saving projects. They don’t offer enough interest to get above inflation, which makes them less than ideal.
Saving Enough to Cover Expenses
Once you’ve got enough money in a savings account to cover about three months of your expenses, you should consider just dropping the rest into your retirement account. There are a lot of advantages to these accounts. For one thing, they usually offer really good interest rates. For another, the money is taxed differently if you wait until you retire to tap into it.
Make a Plan
It’s important to make a retirement plan, though, because you don’t want to work forever. Social Security is great, but it’s not going to cover all of your expenses once you’re retired. You’re going to need enough money to make ends meet without income coming in, and that’s why it’s imperative you start saving now.
Don’t Be a Defeatist
It might be easy to hang your head and joke that your retirement plan is watching the economy collapse before you ever get to touch Social Security. However, such a mindset is defeatist and unlikely. Planning for a bright future is not only realistic, it’s better for your mental health!
Start Today
If you’re waiting for a sign to show you to start saving for your retirement, this is it! The sooner you get your money accruing interest for you, the better! You want to give your money as much time as possible to work for you. Snowballing interest is miserable when it’s on debt, but when it’s on money you’re going to use one day? It’s awesome!
Read More: Common Banking Mistakes You Need to Avoid
Don’t Be Afraid to Save More
While 15% is a good rule of thumb, don’t be afraid to save even more than that if you can! There’s nothing wrong with getting prepared for the future by getting ahead of the curve. You’d be surprised at how quickly your savings could turn into a very comfortable retirement.
Read More: 10 Retirement Money Myths to Avoid
Visualize Success
Don’t think about your retirement savings as money you can’t touch. Think of it as comfort in the future. You won’t want to work when you’re getting gray. You’ll want to spend time relaxing and enjoying everything you worked so hard for! Invest in yourself and make sure you’re saving enough for retirement. The sooner, the better!
Read More: 20 Tips for Early Retirement
