Best Reasons to Start Saving Now For Retirement
For most of us the decision of when to start saving for retirement and how much is a confusing one. The answer is its never to early or to late to start saving and how much depends on the lifestyle you see yourself living in retirement. Of course the earlier you start saving the better because of the effects of compound interest, meaning the earlier you start saving the more your money start making money for you because you will be earning income on your savings while still investing more money. The goal is to eventually be able to live of the income your retirement savings generates.
Importance of Saving for Retirement
Although there are many people out there who have company sponsored pension plans many of do not. My company does not have any sort of retirement savings plan other than the mandatory government retirement plan that they are required to remit contributions to so its all up to me to secure my own retirement future.
How Much Money Do I Need to Save?
Generally if you have a company pension plan then the rule is that your pension plan should cover at least 50% of your retirement needs and government plans another 20-30% leaving you needing to save about 20-30%. However if you do not have a company sponsored plan you will need to save 70-80% of your retirement income on your own. Also keep in mind that there have many instances where companies have reduced employee pension benefits or sometimes even bankrupted the pension plan entirely. Therefore it is up to you to start saving to give you peace of mind.
Saving for Retirement in Your 20s
Of course the earlier you start saving the better but for most people in their 20s they are busy paying down student loans and trying to save for the down payment on their first home. Keep in mind that something is always better than nothing and even if you are only contributing a small amount that you are still getting into the routine and discipline of making weekly, monthly or annual contributions. For example if you were to save $50 per month at the age of 20 which is about $25 per pay cheque you would have approximately $8500 at the age of 29. Now you might say that you certainly aren’t going to retire on $8500 but its $8500 that you wouldn’t have had in that account if you had completely ignored saving for retirement while trying to pay off those school loans.
Saving for Retirement in Your 30s
Saving for retirement in your 30s can be just as difficult as saving in your 30s because you often aren’t quite established in your career and the financial burden of starting a family is also taking its toll. Again its important to “pay yourself first” and make sure you’ve set aside money each month or pay cheque to deposit to your retirement account. Using the above example if you started with $8500 at age 29 and saved $150 each month you would have approximately $41,500 by the time you reach age 39. This amount alone without any further contributions would grow to approximately $151,750 by the time you reach age 59 or $225,000 if you continued to make those $150 per month contributions.
Retirement Planning
It is important to start early and outline a retirement plan for yourself. At what age do you plan on retiring? Will you work part time in retirement? Do you plan to travel or start new hobbies? If so how much per year is this going to cost you?
It is important to quantify your yearly retirement needs now so that you can stay on track to save enough for your dream retirement. You don’t want to get to age 55 or 65 and all of a sudden realize that you aren’t going to be able to take all those trips you’ve been dreaming about right? Plan now for your retirement future.
Saving for Retirement Calculator
There are dozens of online retirement calculators that can help you determine how much you will need to save and how often.
For Canadians the best retirement calculator to use is the one found on the Service Canada web page. It will give you a detailed breakdown of all your sources of retirement income including your estimated government pension benefits.
For US citizens FINRA has a great Retirement Calculator that you can use to estimate how much you will need to contribute annually based on your current retirement account balance, your current age, the age you wish to retire and so on.
So start investing now to secure your retirement future, we all want independence and security in our retirement and only you can make that happen for yourself. Remember the saying “pay yourself first” so that there is never an excuse that there just wasn’t enough money left at the end of the month or pay cheque.
Filed under retirement savings | Comment (0)Explore the Benefits of the 401 Rollover to IRA
Do you know an account which allows you to consolidate retirement savings from previous employer-sponsored plans while maintaining the tax-deferred status of your retirement savings? 401 Rollover to IRA is the answer so choose it as your partner.
A Rollover IRA is used to hold assets which have been distributed from a retirement plan of an employer, such as a 401(k) or Profit Sharing Plan. The amount of money you can rollover is unlimited.
A rollover from a 401(k) into an IRA retirement plan opens up an option for a new investment that is unavailable from your current 401(k) custodian. There are three simple steps to complete a rollover. Firstly, terminate employment from the employer of the 401(k) that you want to transfer. Then, you have to open a Rollover IRA account. While opening an account, you must get the exact address of the financial institution that your 401(k) custodian should send your funds. Secondly, you must move your assets from your former employer’s 401(k), 403(b), and other employer sponsored plan once your account has been opened. Lastly, invest your assets. There are choices of investment products to choose from. These choices include mutual funds, stocks, bonds, and ETFs or saving products like money market, savings, and CDs. Thus, it opens an array of products that will surely fit your needs.
If you find the steps difficult, there are experienced Rollover specialists that will help you with 401k rollover advice and the entire process. The Retirement Help Desk has associates that will gladly answer your inquiries, guide you in the processing of papers or paper works, and even in calling your previous employer’s plan administrators to initiate your Rollover once your account has been opened. Then the plan administrator will forward your Rollover check and it will be gradually deposited in your account.
It has simplified management that allows you to track your progress easily. One good thing is that you can log on to view your savings account and access on your retirement account information found on the same page. See how you can easily access to your money? So start making moves in order for the 401 Rollover to IRA to be successful.
Filed under retirement savings | Comment (0)Tips to boost your retirement savings
Saving for an early retirement is no easy task, and no one said it would be without hard work and sacrifice but if you follow these few helpful steps you can increase your savings dramatically.
1. Pay yourself first, what this means is make sure you contribute to your savings plan first before you put money towards anything else! The easiest and most efficient way to do this is to set up an automatic purchase plan. You can set up weekly, bi-weekly monthly, etc. plans to automatically take a specified amount from your bank account and place it in your savings/investment account. For most people if they don’t pay themselves first they find there is nothing left at the end of each pay cheque!
2. Try driving your car a little longer! I speak from personal experience when I say that new cars are expensive! The average new car costs around $28,000. Two years ago I decided to sell my 1992 Honda Accord and buy a new one. I bought my 92′ Accord for $6000 in 97′. Between 1997 and 2007 I spent less than $2000 on repairs. My new Honda accord costs me about $500 per month for 60 months with a $2000 down payment. So over the course of five years i will have spent $32000 and that doesn’t include any repairs that are not covered under the warranty! Over the 10 years that i owned my 92′ Honda Accord I spent approximately $8000 that’s $800 per year versus the current $$6400 per year that I am now spending on my 2008 Honda Accord. That’s a savings of $5600 per year! If you were to put that $5600 per year for four years in your retirement account and then left it there over 40 years at 6% it would grow to over $188,000.
3. Evaluate your variable expenses. Most people would be surprised to see how much money they waste on stuff! After keeping track of my expenses for 6 months I decided that I needed to make some cutbacks. One thing that I noticed in my expenses was that I was spending just over $5 per day at Starbucks. That’s over $1825 per year on coffee! I decided to start brewing my own which costs me about $8 per month for coffee beans. That’s a yearly savings of $1729 per year. Once again at 6% for 40 years that’s over $267,583. Now wouldn’t sacrificing that fancy coffee help you retire early?? Maybe you don’t spend $5 a day on coffee but everyone has something in their budget that they could eliminate to save a little extra for their retirement.
So maybe your not in love with all of these money saving ideas but even if you can put one of them to use you’ll be on your way to an early retirement!
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