According to a survey by Charles Schwab, the average worker believes that he needs around $ 1.7 million to retire comfortably. One third of adults believe that they need between US $ 1 and $ 3 million to retire, and one in ten believes that retirement will cost more than US $ 3 million. And yet, almost half of the baby boomers have no savings, according to a report from the Insured Retirement Institute.
There is no patent prescription for retirement; Saving is hard work, no matter how much you have to earn or save. However, there is a strategy that can make it a little easier.
Automating Your Savings: Easier Retirement Preparation
To successfully save for retirement, you need to be consistent. Above all, if you're trying to save more than $ 1
Automating Your Savings If you set aside a percentage of your salary or paycheck for your pension fund each month, you can stay up to date. If you manually transfer money to your retirement savings account each month, you can easily forget about saving or simply avoid it because you prefer to spend the money elsewhere. However, automating your savings forces you to save every month – whether you like it or not.
Automating your savings can also lower your retirement budget. Instead of saving money left over at the end of the month, you can create a section of your retirement plan specifically for your budget. If you treat your retirement like another bill that you have to pay for, it's easier to consistently save every month.
If you contribute a set percentage of your wages, you can automatically increase yours each time you receive an increase or bonus. Saving should not be a task to set and forget. If you can gradually increase your pension fund contributions over time, you can save more with less.
How much of your income should you save for retirement?
Many financial experts recommend saving between 10% and 15% of their salary for retirement. However, this is only a rough guide, and the amount you should save depends on your age, how much you currently saved and how much you want to save until retirement age.
If you started saving at the age of 25, you should try to save between 10% and 17% of your salary to retire before the age of 65, researchers at the Stanford Center on Longevity said , However, if you wait until age 35 to save, you will need to save about 15% to 20% of your income to retire before the age of 65. Those who start saving at the age of 45 must save about 25% of their salary by 27%.
If you're lucky enough to have access to a 401 (k) with matching contributions from your employer, take full advantage of it. At least try to save enough to earn the whole game – after all, it's basically nothing.
Even if you can not save much now, every bit counts. And even though increasing the percentage that you save by just 1% or 2% a year does not sound like much, it can make a big difference over time. For example, suppose you currently earn $ 40,000 a year and save 6% of your salary – or $ 2,400 a year. If you save just 1% more of your salary per year, that's an extra $ 400 a year, or just $ 33 a month. That may not sound like much, but at that rate you would save an additional $ 2,000 a year after five years – your total annual savings are $ 4,400. And if you could raise your salary or otherwise increase your income during that time, it would increase your savings even more.
Saving for retirement is a challenge, especially as retirement is becoming more and more expensive. Especially if you do not like to manage your finances, it can be difficult to manually allocate money for the future every month. By automating your savings, you can simplify the process of saving and keeping track of your financial goals.