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For Your Life April 3, 2024

It’s Never Too Late to Start Saving for Retirement: A Guide by Ben Joergens, Financial Empowerment Director

As we navigate through different unavoidable life stages, one constant remains: the importance of saving for retirement. Despite popular belief, it’s never too late to start planning for your golden years. Of course, experts recommend beginning as early as possible, but even if you're a late bloomer to retirement savings, you can still make a difference for your financial future. According to a Bankrate survey, a staggering 56% of Americans feel that they're lagging behind in retirement savings. If you find yourself in this group, read on to see how you can improve your journey towards financial security.

First Steps: Getting Started with Retirement Savings

The first step towards securing your retirement is to start saving now, no matter your age or stage in life. Begin by assessing your current financial situation and setting realistic goals. Utilize online retirement calculators to get a ballpark estimate of how much you'll need in retirement. These tools can provide valuable insights into how much you should be saving each month to reach your desired retirement nest egg.

Choosing the Right Retirement Plan

When it comes to retirement planning, choosing the right retirement plan is crucial. For many, a 401(k) offered by their employer is an excellent option. Take advantage of any employer matching contributions—a perk that can significantly boost your retirement savings. For example, if your employer offers a 6% match, contribute at least 6% of your income to maximize this benefit.

I recommend increasing your contribution by 1% each year as well.  Employees work hard each year in the hopes of earning a raise.  The national average for annual raises is 3%.  If you can contribute that 1% additional each year to your retirement plan, you will still bring home an extra 2% in your paychecks.  This will help you get to that long-term goal of 15% contributions, which most experts suggest. 

If your employer doesn’t offer a 401(k) or if you are looking for additional options, consider opening an Individual Retirement Account (IRA), which comes in both Roth and traditional varieties. A Roth IRA* allows your contributions to grow tax-free, while a traditional IRA* offers tax-deferred growth. With a Roth IRA, you contribute after-tax dollars, your money grows tax-free, and you can generally make tax- and penalty-free withdrawals after age 59½. With a Traditional IRA, you contribute pre- or after-tax dollars, your money grows tax-deferred, and withdrawals are taxed as current income after age 59½. Both options have their advantages, so it's essential to consult with a financial advisor to determine which is best for your unique situation.

Harnessing the Power of Compound Interest

One of the most potent tools in retirement savings is compound interest. By earning interest on both your initial contributions and the interest they accumulate over time, your money has the potential to grow exponentially. The earlier you start saving, the more time your investments have to compound, but even if you're starting later, every dollar saved can still make a significant impact.

Prioritizing Retirement Savings in Your Budget

Finally, it's essential to prioritize retirement savings in your budget. Take a close look at your expenses and identify areas where you can cut back to allocate more towards your retirement fund. By making retirement savings a non-negotiable part of your budget, you can ensure that you're on track to meet your financial goals, even if you're starting later in life.

It's never too late to start saving for retirement. Whether you're just entering the workforce or nearing retirement age, there are steps you can take today to secure your financial future. By following the advice outlined above, you can take control of your retirement destiny and enjoy peace of mind knowing that your retirement years will be financially secure.

Ready to get started? Set up a free financial review and we’ll help you every step of the way.    

 

*An early withdrawal penalty may be assessed and may decrease earnings. Consult your tax advisor.

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