“After climbing the mountain you can finally enjoy the view”—Anonymous
From our 20s till the late 60s, we climb a mountain full of professional responsibilities, family responsibilities, struggles and challenges. Oftentimes, we feel tired and no longer feel the zeal to continue. But, the view at the top of the mountain flickers in front of our eyes and that view of relaxation, freedom and enjoyment inspires us to keep going.
Here, the view symbolizes ‘retirement’. It is that time of our lives when we can finally live our hearts out, relax, enjoy all things we always wanted to do and bubble with joy. But, what if when you reach the top of the mountain, you find the view obscured by clouds? Obviously, you’ll feel that your journey, the exhaustion that you bore and all your efforts went in vain.
Similarly, if the dark clouds of worries obscure your retirement life, you’ll feel disheartened. Even during the golden years of your life, you won’t be able to live to your best. That’s something that you don’t want to happen at all. Right? So, to prevent the clouds of financial worries from obscuring your future, it is imperative for you to plan your retirement savings.
Being financially independent even during your retirement is one of the best feelings in life. You don’t act as a burden for your family, you get to receive quality health care services and have ample money to fulfill all the dreams that you couldn’t earlier. Imagine yourself living a happy retirement life! How does it feel? Fulfilling, isn’t it? Now that you have the vision, it’s time for you to plan about making it a reality. Hence, in this blog, we’ll explore how and when to start saving for your retirement.
First of all, let’s begin with “When”.
When is the Best Time to Start Saving for Your Retirement?
The answer to his question is: as soon as possible. The earlier you start, the smaller the portion of your money you need to devote to retirement savings each week or month and the more time your money has to grow into full-bloomed retirement savings. In fact, the earlier you start saving, the more money you can save for your retirement. It’s always better to have more of something than having it scarce.
But, the irony is that despite knowing that it is best to start saving for retirement at the earliest most of us don’t. Why? There are multitudinous reasons for that and some of them have been mentioned below.
Why Do We Procrastinate on Saving for Our Retirement?
- We think that we have plenty of time and our retirement is far away
- We often get too engrossed in enjoying the present that saving for our future completely slips from our minds
- Other expenses exhaust our money and we have nothing to put into our retirement savings
- Saving for retirement seems like a daunting task. Figuring out which accounts to open, the related rules and regulations and then finally going to open an account sometimes takes us years. It’s not because the process is so time-consuming but because we find these tasks to be challenging and keep procrastinating. After all, retirement is not something of utmost importance on our list of priorities.
- We underestimate the amount of money we’ll need during retirement and the time required to save it, notes Jonathan Svensson, Co-Founder of Almvest.
These are some reasons why we procrastinate on saving for our retirement. But, it is imperative for us to understand that by engaging in all such tendencies we are trading the joy, relaxation and fulfillment we could experience in our retirement years. Today, it might feel okay but once we become incapable of earning and reach the autumn of our physical life, it will certainly become burdensome.
Without proper retirement savings, we’ll become dependent on our children for everything. God forbid, if we develop some chronic health issues, we’ll become a burden for them. We’ll break down emotionally under such circumstances. Seems painful yet far-fetched? Isn’t it? Yes, it is far-fetched but it is a possibility from our future. According to a study, half of Americans struggle with retirement. One of the major reasons why they struggle is because when they had the time to save for retirement, they couldn’t somehow. Consequently, now that they’re finally retired, they are in a terrible mess of struggle.
No one wants to see himself in such situations, but still, most of us land into them. This calls for those of us who yet have time to prepare for retirement, to devise a proper retirement savings plan. This cannot happen until and unless we make retirement savings one of our top priorities. So, are you ready to make the required change in your attitude towards retirement?
If yes, then, spend some time thinking about the day when you’ll start saving for your retirement. If it’s still far away my friend, you’ve not yet understood the gravity of the issue. You shouldn’t wait but start your retirement savings right away. It’s one of the best things that you’ll do for your and your family’s future.
Wondering how to save? Let’s explore together.
There are 5 actionable tactics to start your retirement savings.
Estimate the Retirement Fund You Aspire to Build
Every journey starts with the first step. On your journey of retirement savings, the first step is to estimate the retirement fund you aspire to build. There are a number of factors that determine the amount you should have in your retirement savings. Your dreams related to your retirement life (travel plans, living plans, learning endeavors etc.), the cost of healthcare in your city or country, the educational expenses of your children, expenses that you’ll need to make on your dependents such as parents, children or spouse, home repairs, automobile repairs are some examples of things that you need to consider when estimating your retirement fund.
As the list of such expenses can be lengthy, it is crucial for you to take a week to analyze what type of expenses you’ll have to make in your retirement. You can also talk to your elders or friends to know about things that you need to save for. This can help you a lot. Further, even if you come up with a long, long list, it is crucial to leave some room for uncertainty. Life is never certain and so you can’t be absolutely sure about your expenses during any given period of your life.
Having said that, you should also save some money for unforeseen expenses. Believe me, you’ll be thankful to your younger self for having done that, in later stages of your life. Moreover, don’t forget to revisit your retirement saving list from time to time. Who knows you may develop some new interests over your lifetime and would like to save for them too.
Consider the retirement savings account you should open:
We all are unique. So, we all need different retirement plans depending upon our needs, health and interests. After estimating the minimum amount of money you’d like to have as your retirement savings, it is time for you to consider the retirement savings account you should open. The following are some common retirement savings accounts that you can open. You should select the one that best aligns with your needs.
Different Types of Retirement Savings Accounts You Should Consider
- 401(k):
A 401(k) retirement plan is offered through employers. You should inquire with your employer whether your organization offers 401(k) plans. As of 2021, the IRS enables you to contribute up to $19,500 to a 401(k) if you’re under 50 years of age. If you belong to the age group above 50, you can contribute up to $26,000. It is important to note that the amount of money you contribute to the 401(k) plan gets deducted from your taxable income. Additionally, you’ll also have to face penalties if you withdraw your savings before the age of 59 ½. Moreover, you should also remember that the funds withdrawn are subject to taxes. To know more about 401(k) plans, you can contact your employer or search the internet.
- Solo 401(k):
Solo 401(k) plans are for individuals who are self-employed or own businesses but have no employees. If you fall into any of these two categories, you should consider this retirement account. The Internal Revenue Service (IRS) enables contributions of up to $ 58,000 to solo 401(k) holders.
- 403(b):
This retirement account is specifically for those who work for non-profit organizations or other similar tax-exempt organizations. If you are under 50 years of age, you can contribute up to $19,500 if you hold a 403(b) plan. However, if you are 50 years of age or more, you can contribute up to $26,000.
- 457(b):
457(b) plans are similar to 403(b) plans. If you are under 50 years, you can contribute up to $19,500. Whereas, if you are 50 years old or above, you can contribute up to $26,000. But, two major differences between a 403(b) account and 457(b) account are that the latter is offered by local or state governments and allows you to withdraw money without any penalties even before the age of 59 ½ years.
- IRA:
IRA stands for individual retirement account. If you are employed by a company, you are eligible to open an IRA account. If you earn $5000, you’ll be able to contribute $5000 to the account. But, you cannot put more than $6000 in your account if you are less than 50 years of age. If you are 50 or more than that, you can put up to $7000 in your account.
Analyze Where You Overspend and Save Some Money to Put Into Your Retirement Account
Do you feel that you don’t have enough money to put into your retirement savings? If yes, it’s time for you to analyze where you overspend. There are many things where we overspend without even realizing it. For example, most of us don’t switch off lights and fans even when we don’t need them. We don’t think about using sunlight during the day and reducing our electricity bills. We don’t see food wastage as a waste of money and the list goes on.
So, to begin your retirement savings with sincerity, you should find places where you spend more than necessary. The moment you begin your search, you’ll be surprised at how much money you could have saved and put into your retirement savings. To make the activity of saving money even more exciting, you can involve your family in the initiative. You all can play a game wherein the one who comes up with maximum ways to save money in a month, gets a small treat. This way, everyone in the family will support you in your initiative of building your retirement funds.
Start a Side Hustle
If you feel that even after saving money, you don’t have enough to put into your retirement account and meet your retirement goals in the stipulated time, it is best to start a part-time job- says Adela Belin from Writers per hour. Earn more and save more. Don’t start spending more. It is our tendency to begin spending more when we earn more. You should ensure that you don’t succumb to this tendency.
Further, when planning to engage in a side hustle, it is important to choose one that inclines with your drifts or hobbies. When your side hustle aligns with your drifts, it serves as a means of relaxation for you. It helps you experience the psychological state of flow and enjoy yourself. Moreover, you don’t need to push yourself to engage in your drift. You are naturally drawn to engage in it in your free time.
For example, those who love singing naturally get drawn towards singing in their free time. So, find your drifts. Observe what you are passionate about and look for ways to make money through your passion. These days, photography is one of the most common part-time jobs people engage in. If you possess good photography skills, you should also give it a try. Imagine how smoothly you’ll flow from your full time job to your part-time job if you love it.
That’s exactly what the idea behind following your drifts is. You don’t have to add more stress to your life to earn more. You can follow your drifts and add relaxation to your life while earning more.
Open a Small Account With a Brokerage Firm
If you aspire to grow your money, you can go for this option. You can try opening a small account with a brokerage or mutual funds firm -says Miro Nikolov, CEO of Trading Pedia. As these investments involve some risk, it is imperative not to invest lots of money. Start small, keep growing but don’t ever invest huge chunks of your money. After all, your initiative is to save for retirement and losing your money may throw you into rough waters financially. Once you decide to invest in these firms, there are multiple options that you can choose from such as mutual funds, ETFs etc. However, you should avoid investing in the riskiest segments of the market such as bitcoin, gold, biotech etc. When you aspire to save, it is best to be as far away from risky endeavors as possible.
Dream of living your retirement life to the best? If yes, start saving today. Most people keep procrastinating on saving for their retirement and ultimately, land into a place where their retirement dreams break painfully. Don’t wait to approach retirement so that you can begin to save. The time is now. If you have pledged to start saving for retirement, the above mentioned tactics will be of great help to you. Wish you All the Best.
By Diana Ford
The Epoch Times Copyright © 2022 The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.
