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How Much Should You Be Saving for Retirement?
If you’re wondering how to save for retirement or how much you should be saving, there’s one watchword.
Simply put. Save. As much as you can.
Begin with your monthly budget. If you know your income vs. expenses, you can get a baseline number of what you can afford to save out of your monthly wages. Creating a budget should be a living document, meaning you can alter it as needed to fit your life.
Reduce your debt
Before you can really save, you need to pay off your debts. All the money that used to go to debt can now go to savings. If you’re currently facing debt problems you can’t solve on your own, Call CreditGUARD Today to learn how we can help.
Calculate the amount you’ll need to retire
If you’re not sure how much money you’ll need for retirement, consider using an online calculator. The basic idea is you factor in several variables— your salary and lifestyle now, your current age, the age at which you plan to retire, the rate of inflation, and the number of years you’ll spend in retirement. From here, you can calculate how much money you’ll need to support your lifestyle.
Get a raise and save it.
If you’re younger in your career, you’ve likely got raises and promotions ahead of you. Once you reach a certain threshold (it differs depending on your needs and family size), you should start banking any raises into your retirement fund. This way you accelerate your savings plan. If you’re closer to retirement age, give yourself a raise by spending less money and save that raise. You could also consider other ways or secondary streams to generate income like driving for a rideshare program, tutoring, coaching or some other side job that utilizes your skillset.
As we mentioned, the easiest way to generate savable dollars is to curb your spending habits. If you operate below your means, then you’ll be able to save more money. Just because you have enough money in your checking account for a purchase doesn’t mean you can afford it.
401K & IRA
Take advantage of tax-sheltered accounts like 401(K) and Roth IRA’s. These accounts allow you to deposit pre-tax dollars or after-tax dollars into an account that can then be used to invest and grow your wealth. While these accounts are great ways to save, they can also be used to invest, which does carry a degree of risk.
If you’re in a place where you can tolerate risk, investing can be a way to yield a larger return on your nest egg than simple interest. The downside is market volatility. This can be managed to a degree by hiring a dedicated financial professional, but this is still, by no means, risk-free. Using brokers or financial advisors is a way to mediate that risk and optimize your chances for success.
Read as much as you can about finance, debt, savings and investing. You’ll find even more ways to save. Read more in our Financial Learning Center.