The first step towards retirement is saving as much money as possible. When is the best time to start saving, though? We’re here to provide some tips on saving towards retirement.
When To Start Saving For Retirement
The financial experts say that everyone should begin saving as soon as they can, of course. While this seems to be a case of easier said than done, there are many available savings options for young people. A great rule of thumb is to put away 10% of your monthly income each and every month. For example, putting away 10% of your $5,000 monthly income will lead to $500 in savings. $500 saved each month for a year will equate to $6,000 in yearly savings. Not a bad start at all when it comes to saving for retirement!
Starting the savings process in your 20s will help cover you for any stock market dips. Charles Schwab conducted a recent survey which revealed that Americans believe they need to save $1.7 million by age 65. If this is the target figure, it means you will have to save a minimum of $500 per month, beginning at age 25.
Saving this amount of money monthly can be unreasonable in many cases. Many 25-year-olds are just starting out in the job market. Others may be struggling to pay off student loans and/or raising a young family. If you decide to kick your retirement savings days down the road, then the amount you’ll have to save each month will undoubtedly increase.
How To Save Money
Perhaps you are already out of your 20s and you haven’t started saving for retirement yet. Experts suggest the next best time to begin saving money is now! At this point, putting away any dollar amount you can afford is a good start. If possible, jump on your employer’s 401 (k) plan as soon as possible. Opening a traditional IRA can provide even more investment opportunities than the typical 401 (k) plan. An IRA comes with a $6,000 contribution limit for anyone under age 50.
Fortunately, there are a few other ways one can save money for retirement. Begin by putting away any unexpected or extra cash flow. This could include anything from birthday checks to bonuses. Try avoiding any luxury purchases until you know for sure that you can afford it. Put away any and all spare change for the time being. Picking up a part-time job could also prove beneficial towards retirement savings.
Average Age When Americans Start Saving For Retirement
According to Morning Consult, these are the average age groups when Americans start saving for retirement:
- Ages 20-29: 39%
- Ages 30-39: 25%
- Ages 40-49: 15%
- Ages 50-59: 6%
Tips For Spending Less Money And Saving For Retirement
One important thing to do when saving for retirement is to examine your current spending habits. Here are three simple ways to save right now:
Re-Consider Big Purchases
All large purchases need to be thought about for long periods of time. Can you make do without that new car or home renovation? If an upgrade is needed, consider some low-cost alternatives. The money you save today could be used tomorrow in your retirement.
Consolidate Your Credit Card Debt
Shifting some of your higher-interest credit card debt to a lower-interest debt consolidation loan could undoubtedly leave you with some additional savings to put towards your retirement fund.
Decrease Your Credit Card Debt
Easier said than done, but decreasing your credit card debt today is crucial. Here’s a tip: pay your credit card bills in full every month to avoid any interest charges. If that’s not possible at this point, work to pay down your credit card debt as quickly as you can.
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