When and How to Start Saving for Retirement
If you’re in your 20s or 30s, it may seem like the end of your career is way down the road, but it’s never too early to begin planning and saving for your retirement years now. When it comes to funding your retirement, every dollar that is saved now, is a dollar you won’t have to save later. Plus, the more time you have to let your money grow, the quicker you’ll reach your retirement goals. The biggest question is: how do you get started? We are here with helpful tips on when and how to start saving for retirement.
Create a Budget/Pay Yourself
In order to create a budget, you will first need to determine your monthly income and subtract any expenses you must pay throughout the month. This will allow you to determine how much money you can save each month to go towards your retirement. Adding to your savings is almost like paying yourself – it’s a crucial step in your budgeting plan and should be treated with the same diligence as your other bills. If you notice that you don’t have quite as much funds as you’d like after paying your expenses, find areas where you can cut back on spending in order to free up more money for saving. Whether that means refinancing your auto loan for lower monthly payments, or switching to a cheaper phone plan, any amount you save adds up quickly. You can also use our Money Manager tool in Digital Banking to help you create your budget and stay on track.
Automate Your Savings
It’s easy to promise to set aside a specific amount for your savings, but it’s not always that easy to stick to. We’re all human which means we tend to be forgetful and may accidentally spend our money intended for savings before moving it over from our checking account. Luckily, there is a method to satisfy your retirement savings plan: automate your savings! You can create an automatic transfer in Digital Banking to move your money from your checking to your savings account without even having to think about it. This means you won’t even have a chance to miss the money that’s coming out of your account, and you’ll be one step closer to reaching your retirement savings goal.
Choose the Right Retirement Account
There are several savings options to help get you on the right track to prepare for retirement. It’s important to do your research and find the one that best suites you and your needs. A few retirement account options you may be interested in include:
- Traditional IRA: Contributions to a traditional IRA may be tax-deductible in the year you make them, depending on your income and whether you also have an employer-sponsored retirement plan such as 401(k). Your contributions and earnings grow tax-deferred, which means you won’t pay income taxes until you withdraw money from the account. You will need to start withdrawing funds from this account by the age of 72, which is referred to as required minimum distributions. The money will then be taxed at your income tax rate at the time you withdraw it.
- Roth IRA: With this retirement account, your contributions are not tax-deductible. Contributions can be made as long as you have earned income. These accounts allow for tax-free growth over your lifetime. Although Roth IRAs allow for your earnings to be withdrawn tax free, you must meet certain requirements such as having the account open or withdrawing for a qualified reason. Qualified reasons include being over the age of 59 ½, being permanently and totally disabled, or first time homebuyers.
Take Advantage of Company Benefits
Trying to save for retirement can be tough when you go at it alone, but your employer may be able to help. Many companies will offer a matching program which can accelerate your 401(k) savings. A 401(k) plan is an employer-sponsored, defined-contribution, personal pension account. These accounts are great for getting your retirement funds started. Most employers will have it automatically deducted from your paycheck, which is like automating your savings account, is convenient and won’t leave you missing the money you don’t see. Check with your employer about possible retirement plans that your job offers.
Talk With an Expert
There are a lot of questions that come with planning for retirement, and it can easily get overwhelming. How much will you need to save for future healthcare? Are you on track to reach your long-term goals? Luckily, a financial advisor can help you clarify your goals, track your progress, and give you more peace of mind to achieve your financial goals. Our Robins Investment and Retirement Services are here to provide professional retirement, insurance, and investment services to members when they need it.Contact us to set up an appointment and get your retirement plan started.
It’s never too early to prepare for your future and begin saving towards retirement. We want to help you get on the right track so you can meet your retirement goals and feel at peace knowing your future is secured.
At Robins Financial Credit Union, our mission is to enhance the financial well-being of our members and community. We honor this commitment by providing educational content to help you make the most of your finances. Read our other blog articles to help you gain the financial knowledge you need to succeed.