What is your idea of the perfect retirement? A place on the ocean? Being closer to children and grandkids? Retirement dreams differ, and so do our time horizons. But this much is certain: Saving for retirement isn’t easy, and for most people it’s on the back burner.
Whether you are 20 or 60, saving for retirement starts with setting a disciplined process. The best thing to do is set an age you want to retire and budget to get there.
Here’s how to get started:
• Talk to a certified financial planner (CFP). This is a great first step, one that will result in something everyone needs: a plan. People have so many different goals and
expectations of how they want to live in retirement. A CFP can help you determine the different ways to get there. (Note: look for a CFP that offers a no-cost initial consultation,
perhaps at CommunityAmerica Credit Union!)
• Start now! The earlier you start, the less you’ll have to sock away each month, and the more that money can do over time. You can start an IRA as soon as you have earned
income that you would file taxes on. Even a 16-year-old working a part-time job can stash away part of those earnings and let the compounding interest and/or investment
gains go to work! http://www.dol.gov/ebsa/publications/10_ways_to_prepare.html And if you set this up to auto-deduct from your checking account, it will automate the process and make it even easier to save!
• 401(k), all the way. If your employer offers a tax-deferred 401(k), do everything you can to get with the plan. If they match some of your contributions, AWESOME! I
recommend always contributing at least up to your match. So if your company matches your contributions up to three percent, at least contribute that amount. We’re talking free money, folks. The more you can put towards your retirement early, the more time is on
your side. http://www.practicalmoneyskills.com/personalfinance/lifeevents/benefits/401kadvantages.php
• Roll with a Roth IRA. If you have more than 10 years until retirement, consider opening a Roth IRA in addition to a 401(k). Try an easy, systematic contribution of, say, $50 a month or more. Then every year increase your contribution until you eventually contribute your max ($458.34 per month or $5,500 per year if you’re under 50; $6,500 per year or $541.67 monthly if over 50).
Setting up a systematic approach helps you budget knowing exactly how much you are saving for retirement, and you’ll avoid having to come up with a large lump sum to
contribute at the end of the year. If you are in the middle of or nearing the end of your earning years, stay partnered with a CFP to adjust your plan for your end-of-life goals such as long-term care insurance,
I know, many of us may be struggling to budget for today, let alone tomorrow. There are many things competing for whatever is leftover from your paycheck. But think about what living without one would be like – whenever that day may come for you. Everyone dreams of the day we can retire. The sooner you get working on your plan, the sweeter it will be.
Kat's Money Corner is posted on Dollars & Sense every Tuesday. Kat Hnatyshyn, when not blogging or caring for her little one, is a manager with CommunityAmerica CreditUnion. For more financial chatter, click http://twitter.com/savinmavens.