Are you wondering whether it is time for you to start saving for retirement? Well, the answer to this question is simple. The earlier you begin saving money for retirement, the better. Unfortunately, nowadays, not enough people realize the importance of this. On the other hand, the number of people who take some action is minimal, especially when we talk about millennials.
However, whether you are in your ’20s, ’40s, or ’60s, the proper answer to the question When might be the best time to start saving for retirement is NOW. If you think about it, the sooner you begin saving, the more time your money has to increase.
For instance, if you are in your 20’s and you deposit each year the same amount of money, say $2,000, then by the time you reach your 60’s you will have saved enough money for retirement. To be precise, that’s roughly 40 years of saving.
Also, let’s not forget about the interest rates that will increase your money. On the other hand, if you begin saving money in your 40’s or your 60’s the final amount in your bank account would be much different. In the end, even if you began saving late or have yet to start, it’s essential to know that there are things you could do to increase your retirement savings.
How Much Income Do I Need to Save?
Nowadays, according to the Bureau of Labor Statistics, the median wage for workers in the United States in the first quarter of 2019 was $47,060 per year for a 40-hour workweek. And according to the Transamerica Center for Retirement Studies, Americans in their 20’s should be able to save $16,000 of their yearly income for retirement.
Further, by continually contributing to the retirement account, Americans in their 20’s can achieve their savings goal more quickly, thanks to compounding interest, which can help boost your retirement account balances over time. Here’s what the Transamerica Center for Retirement Studies has gathered as information regarding the other age group generations:
- Americans in their 30s: $45,000
- Americans in their 40s: $63,000
- Americans in their 50s: $117,000
- Americans in their 60s: $172,000
Also, according to the CNBC, a 30-year-old should have at least the amount of their annual salary saved for retirement. By the time this person is 40 years, his retirement savings balance should be at least three times their yearly salary. Further, by the age of 50, the balance should be at least five times their annual salary.
Saving for retirement means you won’t have to worry about money when you reach the retirement age. Working in your 20s might not be exhausting. However, when you are in your ’60s, everything is a little bit different. Also, it is a mistake to believe you can rely entirely on social security or a pension plan in retirement.
So, no matter what age group you are, you should consider saving for retirement as early as you can. However, you need to do your own due diligence to understand what an IRA and a 401k plan are. After all, retirement is a goal worth working for, no matter your age.
Saving For Retirement. Why and How?
Saving money for retirement can create financial benefits not only in the future but in the present as well. For instance, nowadays, most employers offer different types of retirement plans like traditional or Roth 401k. By doing so, they offer to match a portion of your contributions to a workplace retirement account. On the other hand, if you are self-employed, you can still be eligible for some tax advantages associated with saving for retirement, based on your income.
Begin Saving Money as Early as Possible
The sooner you begin saving money for retirement, the better you will be. In addition, financial experts believe and advise that people should save enough money that could replace 80% of the income they will need for every year they will be retired. If you think about it, saving for retirement when you are young and in your working life is more manageable. Here, consistency is the key to success.
Save in Small Steps and Set Small Goals
Each beginning is difficult, especially if you have to set aside a large sum of money at once. Not only is this not easy, but for some people it is impossible. Further, the idea might be so overwhelming that you never get started. That is why you should save in small steps as they won’t affect your financial life.
Furthermore, when it comes to saving in the long term, the amount you can set aside each month is not that important. Persistence is important. This way, you can slowly build your retirement savings. Also, you should regularly set small goals. Once you achieve them, you will see that your retirement savings efforts are paying off.