People who don’t understand the essence of savings often turns a blind eye towards retirement savings. Most people are unprepared for retirement. A shocking report says that 30% of North Americans have no retirement savings and purely depend on the welfare system or another service to make up their living after retirement.
Importance Of Retirement Savings
Savings for retirement is essential to ensure that your golden years are comfortable and fruitful. Although there are government aid services that provide Pension plan to the senior citizens, apparently this will not provide the comfortable life you are looking for. Even though you haven’t started the savings yet, it’s never too late to start your retirement savings. By investing your money for the savings today can reap more benefit for the future. It is not necessary that you need to make a big contribution to retirement savings. A small percentage of your income can make bigger contributions.
There are two components of retirement planning
Although both are essential components, yet personal planning is more important because it is the determining factor which decides, what kind of lifestyle you wish to live in your future. Whether you want to be taken care of the old age homes or live independent and spend your life the way you want.
This determines the source of income and expenses based on your budget. You can really enjoy your retirement life when you have structured your income in the early part of your life.
People are often confused when to start their retirement savings? Apparently, the answer is simple and straight forward. It is very crucial to start your retirement savings as early as possible. The early you start, the more money you can contribute.
With numerous financial responsibilities to juggle and a big chunk of paycheck going towards your monthly expenses, how to save for retirement is a growing concern for many Americans. Most people are wondering and more scared, how they are going to spend their retirement years when they are no longer earning. However, there are ways to do it!
Easiest Ways To Make Your Retirement Savings
Increase Your Retirement Contribution Size Whenever You Get A Hike
This is one the easiest and ideal way of increasing the retirement savings amount. For example, if you get a hike of 5% on your basic salary, then it is not essential that you need to contribute all the 5% towards the retirement savings; instead, you can make 2-3% towards retirement contribution. Although the concept of saving more is difficult and unpleasing, however, the benefits you enjoy out of your savings are abundant. This approach will definitely guarantee you to save more to lead the happiest retirement life.
Pay Yourself First
Most people often think that the percentage of contribution towards retirement savings should be done after you are met with the other expenses and your family budget. However, it should be on the contrary!
Paying yourself means that you need to allocate funds for the retirement savings first before you think about the other expenses. Though it is a small number, say, for example, you are contributing 50$ per month, and you are doing for a period of 30 years. This will account to around 40,000 dollars by the time of your retirement. In addition, you will have the interest rate added, so your final savings could be around 85,000$, which is really good money to make your retirement life more cherishable.
Set Up An Automated Budget For Your Retirement Savings
Automating the deposits towards retirement savings is one of the simplest and easiest ways to do it efficiently. Once you have determined, how much you can contribute to your retirement savings, you can set automated payment so you will not skip making the contribution. One of the major advantages of automated savings is, the amount you have budgeted for the 401K will directly get deposited towards the account, so you will not have the chance of spending the money out of impulse buying or unnecessary expenses.
Take Advantage Of The Catch-Up Contributions If You Are Already Through Your Retirement Age
Once you turn age 50, you become eligible to make additional catch up contributions to an amount of 6,000 $ towards your retirement plans. By doing so, you can shield up to 24,000 from tax exemptions. Retirement savings have a huge impact on tax savings. This program perhaps provides people with an opportunity to make up for their past savings sin. Benefits are profound with catch up contributions
- You will have more money for retirement
- Considerable tax savings
- Savings are done automatically
Knowing how much you will need and how much you will spend will not only create a process of savings, rather paves the way for investment. Unless you set benchmarks, you cannot pursue your retirement goals. So, use all these strategies right now and make your retirement years more peaceful and happy.