How to Effectively Boost Retirement Savings
There are dozens of excuses people make as to why they’re not saving for retirement. I’m too young, I don’t make enough money, or the infamous ‘What’s the rush?’. Whatever the reason may be, it’s important to understand that there are many ways to save that don’t entail extreme couponing or eating Ramen noodles every day. Although we do love finding a great deal and Ramen noodles will always be a fond memory; there are more sensible ways to prepare for retirement.
Set a monthly (not annual) goal. How in the world can I possibly save that much money while still living comfortably? This is a common thought when thinking about retirement savings. The key is to think about savings on a monthly basis instead of one large annual goal. A lump sum is more abstract and often seems bigger than the equivalent amount of money broken out into monthly amounts over time. Saving an extra $6000 can also be seen as $500 per month or even $125 per week. With this in mind, set your savings goals based on smaller more manageable time frames.
Plan for a long retirement. Let’s say that after all of your planning and research you build your retirement plan expecting to live to 85. However, it turns out that you live to 95. This poses a major problem: How are you going to make your money last an additional 10 years? The key is to plan for a longer retirement as there is great uncertainty in an individual’s lifespan. According to the Social Security Commission, the average life expectancy for males is 84 and 86 for females. Planning, however, needs to take into consideration living longer than average, or half of retirees could run out of money.
Make saving the default option. Many companies are making it easier to prepare for retirement. Elect to have a set amount of money be automatically withheld from your paycheck and deposited into your specified retirement account. Saving by default prevents you from forgetting or skipping a monthly deposit. Start with a small amount and see how it feels. If you truly are unable to make it happen and causes you to take on credit card or other debt, then it’s not going to work. But you may be surprised that you can start with a 3% contribution and still make ends meet.
Think about your future self. The money that you save for retirement now will be used to pay your bills in the future. It’s important to take a look at what kind of retirement you desire. Do you want to stay in your current home? Do you want to travel the world? Whatever your plan may be, it’s important to take a look at what kind of retirement income your current savings rate will provide you with. From there you can make the necessary changes to ensure that you’re on the right track.