Retirement is supposed to be something we look forward to. It’s a time where you get to relax, spend more time with your children and grandchildren and maybe travel to places you’ve always wanted to go. If retirement is so great, then why do most people get anxious when the topic of retirement is brought up?
We can probably thank the 2008 recession for that. When the recession hit, thousands of people nearing retirement age or already retired lost good portions of what they had saved. Now, there are two main questions people ask about retirement:
- Have I saved enough so far?
- Will I outlive my money in retirement?
However, there is no reason to let fear paralyze you into inaction when it comes to saving for retirement. Below are a few ways you can take control of your retirement saving and give it a shot in the arm to start the year off right.
There are a few things you need to do before you start saving for retirement.
- Recognize that you need to start now- the best time to start saving for retirement was after receiving your first paycheck; the second-best time is now. Even if it’s a small amount every month, every little bit counts. For example, in order to reach $2 million in a retirement account that earns seven percent at age 65, a 20-year old would have to contribute $245,000 of their own money over 45 years. To reach that same $2 million mark at age 65, a 50-year old would have to contribute $1,008,000 in 15 years. Start saving now.
- Cut down on spending- you don’t necessarily need more income to start saving for retirement. By cutting down on spending, you can create small additional contributions. Again, size of the contribution doesn’t matter. A $70 contribution every month for 35 years in an account earning eight percent gives you about $160,000.
- Set goals- how will you know success without something to aim for? An investment and financial planning professional, such as Ray Perry at Putnam Bank, can help you identify what you’ll need to live comfortably in retirement, as well as milestones you need to hit on the way.
Funding Your Retirement
Have no idea how to fund your retirement? Try these options:
- Employer 401(k)- have a small percentage of each paycheck set aside into a 401(k) sponsored by your employer. If your company offers a matching contribution plan, be sure to take advantage of that
- Fund an IRA- a Roth or Traditional IRA are great options if your employer doesn’t offer a retirement plan or if you are maxing out your contributions. Both types of accounts have various tax benefits, so be sure to consult with your tax advisor as to which best fits you.
- Build your emergency fund- while it appears this may not have an effect on your retirement, it certainly does. By having six months of living expenses in an easily accessible savings account, you allow yourself to continue making retirement contributions even if you need extra cash for emergencies.
Most Importantly: No Dipping
Once money is in your account, leave it there until retirement. Early withdrawals come with stiff penalties in most cases. You’re also taken away from the fund you have set aside to live better in retirement.
Saving for retirement takes consistency and willpower, but it doesn’t have to be a burden to you. Consult with the investment and retirement professionals at Putnam Bank to see how we can help you plan for the future.
Putnam Bank, Member FDIC and Equal Housing Lender.
Products offered through Infinex Investments, Inc:
- are not insured by the FDIC or any other agency of the United States
- are not a deposit or other obligation of the bank or bank affiliate
- are not insured or guaranteed by the bank or bank affiliate
- are subject to investment risk, including possible loss of value