Having enough money saved for retirement is a top financial stressor among nonretired adults. The fact is, retirement can be expensive, and the sooner you can get an idea of what you will need to fund a comfortable retirement and take steps to grow your nest egg, the less stress you will have. It takes educating yourself, adjusting your spending habits and committing to savings. The following tips and tools can help you take control of your financial future for greater peace of mind, whether retirement is several decades or just a few years away.
Get a rough estimate of what you’ll need. While some experts project that you will need at least 70 to 80 percent of your pre-retirement income to maintain your standard of living once you no longer work, free planning tools can help you get the estimates you need to plan your financial route, starting by tracking your current expenses.
Estimate how much Social Security will contribute. On average, Social Security should provide about 40 percent of your post-retirement budget, but this could change depending on when you retire. To close the standard of living gap when you stop working, you’ll need to consider other sources of income like employer-based retirement plans, savings and investments. Find an estimate of your Social Security benefit in the year you plan to retire with this tool.
Contribute all you can to your workplace retirement savings plan. If your employer offers a 401(k) plan, setting up automatic deductions from your paycheck make it easy to contribute. Many employers contribute up to a certain match, so take advantage of this free money. Over time, compound interest can make a big difference—just try to never touch your retirement savings until you retire!
Pay off your debts first. No investment strategy pays off as well as, or with less risk than, eliminating high-interest debt. Most credit cards charge high interest rates–as much as 20% or more. The wisest thing you can do is pay off any balances in full as quickly as possible. Once you’ve paid off your credit card balance, you can budget your money and begin to save and invest. To connect with a credit counselor and learn more about paying down debts, visit this resource.
Learn about savings and investment options. IRAs (individual retirement accounts), for instance, allow you to save and invest money for retirement on your own that’s not linked to wages or contributions from an employer. The IRS has a great overview of IRAs, mutual funds, stock market investments, and other options to make your money grow. Just make sure you’re tracking the maximum contributions each year across all of your retirement accounts.
Consider working beyond normal retirement age. Each year you delay taking your Social Security benefit beyond the normal retirement age (65 to 67 depending on your birth year) up to age 70, qualifies you for an 8 percent higher amount in your monthly Social Security check. If you are able, working longer can postpone the need to dip into your savings and allow it to continue to grow. This guide can help you see how much you may receive at your full retirement age.
Supercharge your savings strategies. Small savings can really add up! Every time you get a raise, increase your 401(k) contribution to get the matching dollars from your employer, for example. Or round up to the nearest dollar each time you make a purchase and stash the remaining cash away. Click here for more everyday savings ideas.
Start downsizing to free up cash. Live a thriftier life. Look at every item you purchase to see if there is a more affordable option. Ask yourself if you “really need” the pricier item or if it’s better to feel more secure in retirement. For example, you might choose to move to a smaller, less expensive residence, downgrade your car or cable plan, limit dining out in favor of more potlucks, trade a pricey gym membership for home workouts, shop at outlet clothing stores or warehouse stores for bulk items, and so on. Every dollar adds up and can get you closer to your goals.
Consider starting a “side hustle.” Whether you can do some freelance writing, dog sit, make craft items to sell, or take on another secondary source of income, the earnings can help you save for retirement—and limit your withdrawals from your savings when you no longer work.
Retirement planning and goals depend on many individual factors. Consider working with a professional financial advisor for guidance to ensure you are making the best decisions for your unique situation.