People often wonder when they need to start seriously thinking about their retirement goals. Some people do it in their twenties, but for the most part, your early 30s is the optimal time. At this point in your life, things are stable enough to really start saving money, and you can probably idealize how you want to live once you’ve retired.
Reason #1 – Your Career Is Stable
By the time most people reach their 30s, they’re well into their careers and they know which direction they want to take in life in terms of their jobs. Even if you have plans to find a different employer in the future, you probably know what you’re going to be doing for that employer and what you can anticipate as far as your salary is concerned. That’s one of the reasons why your 30s is a great time to truly think about retirement. There’s more stability and less stress, which makes it easier.
Reason #2 – Your Finances are in Order
Just about everyone struggles somewhat in their 20s to make ends meet. They pay rent, they pay student loans, and they might even be building their credit. Adding retirement savings to the mix is difficult for people who live paycheck to paycheck, or nearly paycheck to paycheck. In fact, your 20s is the time when you should start saving for a rainy day and finishing up an emergency fund that consists of about three months’ salary. Once this is done, it’s far more feasible to start putting money aside for retirement.
Reason #3 – You Shouldn’t Procrastinate
If there’s one mistake that people make most often when it comes to saving for retirement, it’s waiting too long to start. Keep in mind that much of your retirement funds are going to come from interest that you’re paid over time, so starting your savings plans a decade late can cost you a significant amount of money. The sooner you can start putting funds into your 401(k), IRA, or even high-yield savings accounts, the better. If you wait beyond your 30s, you’re significantly limiting yourself.
Reason #4 – You’ll Get More Lifetime Tax Breaks
Depending on which tax bracket you fall into, you can save thousands of dollars each year in tax liability by putting money into savings accounts designed for retirement. IRAs and 401(k) plans alike both have very specific tax laws that are designed to protect you from high liability, so for every year you have money in those accounts, that’s more money in your pockets over the course of your lifetime. Getting started sooner rather than later can literally save you tens of thousands of dollars.
Thinking about retirement is about much more than dreaming of sailing through the Caribbean or traveling cross-country in your luxury RV. In order for your dreams to come true, you’ll need to plan and save for decades. Starting in your 30s provides you with the perfect balance because you’re financially stable, but still young enough to make a tremendous impact on your post-retirement life.
What do you think will happen when you retire? What kinds of things do you want to do? Will you enjoy not working, or will you miss the sense of purpose each and every day? Having realistic retirement expectations is vital for your happiness, financial status, and wellbeing, but it’s difficult for many people to learn how to set expectations. Here are some tips for doing just that.
Know What You Want from Retirement
First things first, it’s important to spend some time thinking about what you want your daily life after retirement to be like. Do you want to spend time relaxing at home, or would you rather buy an RV and travel the country for months out of the year? Understanding how you plan to spend your time is a great first step for everything else, including your financial planning. Being realistic about things will help you decide how much you really need to save and whether your dreams of leaving your home behind for the open road can come true. What’s more, it’s perfectly natural for your retirement goals to change with time. Just make sure you’re adjusting your savings and investments along the way to compensate.
Don’t Assume You’ll Be Happy to Leave Your Job Behind
Everyone looks forward to retirement to a degree, but not everyone is truly prepared for waking up each morning without the need to go to work and fulfill a certain role. After all, people work hard all of their lives to enjoy fulfilling careers, and suddenly giving up that career can leave them feeling empty. If you don’t take the time to think about how you might handle those feelings, you might find that your retirement isn’t as fun or relaxing as you’d like. To combat this, anticipate a few negative feelings now and then – especially at first. Then, find a way to combat them. For example, if you worked as a journalist, offer to write an editorial piece once a month. This can help both you and your employer in the long run.
Don’t Procrastinate with Your Savings
When people are young, they rarely take the time to think about how much money it’s going to take to retire. If they do, they think about things in terms of today’s cost of living without accounting for things like inflation. Just look at how much things have changed in the last 30 years; it’s a good indicator that the trend will continue for the next 30. When saving money for retirement, keep in mind that even a half million dollars won’t be worth what it is today. Make sure you account for inflation so you don’t find yourself struggling when it’s time to actually hang up your hat and retire.
Setting realistic expectations for retirement is about much more than simply saving enough money. You’ll need to understand what you want from your retired life and how you’d like to live. However, you’ll also need to account for inflation, which is one of the most common mistakes young people make when it comes to saving. Setting the right expectations from the start makes retirement easier – and far more enjoyable.Continue reading
If you’re like many people, chances are good that you haven’t really thought a lot about retirement. However, it’s never too early to start saving, and there are plenty of simple, easy, and even clever ways to do it without breaking the bank. Here are five of the best.
#1 – Your Employer’s 401(k) Plan
By far, the most common way people save for retirement is through their employers’ 401(k) plans. They’re simple enough to get started, and because your employer may match your contributions up to a certain amount, it’s like getting free money with every paycheck. If your employer offers one, make sure you’re withholding enough to take advantage of your employer’s maximum contributions.
#2 – The $5 Bill Challenge
If you’re looking for a clever, yet challenging way to save for your retirement, the “$5 Bill Challenge” is a very popular option that has recently surfaced in social media. The idea is to save every $5 you touch all year, then make a deposit at the end of the year into a savings account or IRA. This method works very well for some people, but not so much with others. For example, if you rarely pay for things in cash, chances are good you won’t end up saving much using this method.
#3 – An IRA
An IRA – or Individual Retirement Account – is another must have for most working-age people. It’s a very special type of savings account that comes with its own tax rules, which makes it ideal for people who are trying to save enough money to retire comfortably. Different financial institutions offer different terms and conditions with their IRAs, so make sure you shop around and put your money in the right place. What’s more, be sure to review the bank’s terms for early withdrawals, funds transfers, and more. Some charge exorbitant fees for these services, but others do not.
#4 – Direct Deposits into Savings Accounts
Most people freely admit that they are able to save more money if they never have access to that money to start with. That’s why things like 401(k) are so popular; funds are deducted from your paycheck and automatically placed into your account. You can also do this on your own if you have a moderate- to high-yield savings account. Just like you have your paycheck direct deposited into your checking account, you can also determine a flat amount or percentage of your paycheck that you’d like to move to a savings account.
#5 – A Change Jar
If you don’t have a change jar at home, you should. Though it may seem a bit cliché, you can actually save quite a bit of money by implementing it. Each night, empty your pockets of change and put that change in a jar. When the jar is full, take it to the bank and ask them to deposit it into your savings account or IRA. It may seem irrelevant, but think of it like this: if you have $0.75 in pocket change each day, that’s $20 a month, or $240 a year. Over the course of 25 years, that change will be enough to buy a brand new car when you retire.
As you can see, saving for retirement doesn’t have to be a difficult task. There are numerous options available to you, and in the vast majority of cases, combining these options is the best way to go. For example, you can have both an IRA and a 401(k) plan, and if you implement the $5 bill challenge or start a change jar, then that’s even more money you can save.
Retirement is an exciting time in your life. It’s the ultimate reward for working your entire life, and it’s an opportunity to see the world, to live your way, and to enjoy all of the finer things. Despite this, many retirees find themselves twiddling their thumbs, looking for things to do in order to occupy their time and feel productive. If this sounds familiar, there are plenty of ways for you to keep busy while earning a small income at the same time.
A Part-Time Job
There is no time like post-retirement to do what you truly love to do. In fact, there are plenty of ways to turn your hobbies into paying gigs. Do you know a lot about wine and pairing? Apply for a position in a wine shop and let your skills shine. Do you really like golf? If so, apply at a country club. Are you a Civil War buff? Head to your closest Civil War museum and offer up your expertise. All of these things can go a long way toward keeping you happy, helping others, and supplementing your income.
Turn Your Hobbies into Income
No matter what you like to do, chances are good that if you can make it with your own two hands, someone is interested in purchasing it. For example, if you enjoy building ornate birdhouses, you might be surprised to learn just how much you can earn by selling them. Along those same lines, if you’re a fan of drawing or painting, consider framing your art and selling it. This is by far the most popular method via which retirees earn supplemental income, and it’s always a great feeling to know the things you create can bring others so much joy and happiness.
Be a Tutor, Teacher, Coach, or Mentor
Your years in the workforce provided you with far more than just a paycheck; they also gave you valuable expertise that you can share with others through tutoring and teaching. Place an ad in your local newspaper offering to teach others the things you know best, whether that happens to be playing piano, making clothing, painting, or even playing football. There are people out there who can benefit from your knowledge, so be sure to use it to your advantage after retiring.
Help Your Friends & Neighbors
Chances are good that many of the people in your neighborhood are still working hard for a living. Chances are also good that those working neighbors have gardens that need tending, dogs that need walking, and children who need some babysitting from time to time. Just let your neighbors and friends know that you’re interested in helping them, and you’ll soon find yourself with plenty to do – and plenty of extra money, too.
You don’t have to completely give up working once you’ve retired. In fact, there are plenty of ways in which you can earn an income without a full-on career. Aside from those mentioned above, you might also consider things like starting a small business, tapping into the sharing economy, or even learning more about investing so you can turn it into a hobby and boost your earning potential.