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No matter how old you are, it’s never too early or late to start saving for retirement. On average, you can expect to spend about 20 years in retirement. To live comfortably, you’ll need about 70 percent of your pre-retirement income each year. That may seem like a lot of money, but if you start saving now, you’ll be better prepared when your last day of work looms. Here’s how you can start getting ready for retirement:
1.Set a Goal
Saving is difficult if you don’t have a goal in mind. The first step in setting your goal is to decide how much money you will need each year after you quit working. Divide that number by 12 and you have your monthly savings goal. For instance, if you’ll need $50,000 per year to live comfortably during your post-retirement years, you’ll need to save about $4,200 every month.
2.Talk to Your Employer
If you aren’t currently investing in any type of retirement plan, talk with your employer and see what they offer. If your employer offers a 401(k) or other retirement savings plan, start making contributions as soon as possible. Find out how much your employer contributes and how much you’ll earn in compound interest. Contribute as much money on your own as you can reasonably afford.
3.Open an IRA
If your employer doesn’t offer a retirement plan, consider opening an Individual Retirement Account, or IRA. You’ll need to speak with your financial advisor about the benefits of both traditional IRAs and Roth IRAs to decide which will best meet your needs. Additionally, you may want to consider opening an IRA even if your employer does offer a 401(k); you can never have too much money when you retire.
Though we can’t depend on Social Security 100 percent, it does make sense to understand your benefits as they currently stand. You can visit the Social Security Administration’s website and use their retirement calculator to figure out how much you’ll receive in the amount of benefits when you retire. The amount that you’ll receive from Social Security is typically about 40 percent of your pre-retirement earnings. This money can offset the amount that you need to save on your own.
5.Talk to a Financial Professional
If you want to be sure that you’ll have enough money to support yourself and your family after you retire, discuss all of your options with a professional financial planner. A financial planner can look at your current finances and help you decide how much you can afford to save towards your retirement. A financial planner can also help you invest your money in ways that it will work for you, making more money without any effort on your part.
If you haven’t yet begun to save for retirement, you need to start immediately. The older we get, the faster time goes, and the day that you retire will be here sooner than you realize. With a healthy retirement savings, you can be sure that you will be able to retire and live in the way that you have become accustomed to.