Advertising
Advertising

4 Simple Ways to Save Enough for Retirement

4 Simple Ways to Save Enough for Retirement

Odds are you’re one of the nearly 60% of Americans moderately or very worried about not having enough money for retirement. Regardless of your age, profession, income or social status, a desire for retirement savings continues to top seemingly every personal finance poll. The question is: what simple things can you do to calm your nerves and instill the confidence you need as retirement approaches?

Stop Refusing Free Money

Recent data suggests as much as 80% of companies who offer retirement plans also offer to match employee contributions, up to an average of nearly 5% of each employee’s pay. Effectively, that’s a 5% bonus every single year just for contributing enough to meet your employer’s match program. Ask your Human Resources contact if you’re eligible to participate in your company’s retirement plan. Stop refusing free money!

Max Out Traditional Retirement Plan Contributions

If you are to have any any chance of saving enough for retirement, you need to save much more than the minimum to meet your employer’s match. For most traditional workplace retirement accounts, the 2014 maximum contribution was $17,500. If you contribute most, or all, of the maximum consistently year after year, you’ll be well on your way to a robust retirement

Advertising

For self-employed workers and non-traditional retirement accounts, check with your financial advisor for annual limits to be sure you’re maxing out in compliance. You do have a financial advisor, right?!

Assuming you’re 30 years old, make $75k per year, plan to retire at age 65 and earn 6% rate of return in your 401k, the below chart shows effect on your bi-monthly paycheck and the monumental difference between just contributing to get the match versus maxing out the $17,500 allowable.

Advertising

Bankrate.com 401k Calculator

    Go to BankRate.com’s 401k Contribution Calculator to customize your own scenario.

    Tax-Advantaged Savings

    Contributing to traditional retirement accounts is fundamental, but what if your contribution limits are too low to allow adequate savings? Or what if you’re concerned about the taxes you’ll pay down the road on the traditional retirement account income?

    A healthy retirement plan should include tax-advantaged savings like a Roth IRA, if you you qualify. Tax efficient investments like municipal bonds may make sense for a conservative portion of your savings. An often-overlooked savings vehicle, perfect for tax-advantaged retirement income, is a cash value life insurance program.

    Advertising

    Cash Value Life Insurance may not be a good fit for everyone but the tax-favored savings accumulation, flexibility and death benefit are attracting more and more savers, especially young professionals.

    Protect Your Savings

    If you’ve followed the nuts and bolts of saving for a healthy retirement listed above, you will be in good shape. If you’re truly a saver, protecting what you’ve worked so diligently to build should go hand in hand with your plan. Protecting your savings means a few different things:

    First, don’t take more risk than you’re comfortable taking. Unless you’re burying coffee cans filled with cash in your backyard, every retirement savings plan includes some measure of risk. Fully understand the risk in your investment program or keep asking your financial advisor more questions until you understand and are comfortable with your investment plan. A properly allocated and diversified savings plan helps guard against any major economic swings.

    Advertising

    Ensure you don’t get wiped out by insuring your plan. Life insurance and long term care protection should be part of every healthy retirement plan. Owning adequate life insurance can prevent financial ruin and emotional distress for your Family during the savings years — just watch a few of the short videos at non-profit LifeHappens.org to see what I mean. U.S. Department of Health and Human Services statistics show that 70% of people turning Age 65 will need some type of Long Term Care services. Lifetime income annuities may also be a nice compliment to your retirement plan as you get closer to retirement age. These annuity programs can guarantee an income for life but still enjoy a potential market rate of return. It’s important to note the earlier you secure these important retirement protections, the cheaper they will be.

    Saving enough for retirement may seem like trapping a unicorn or finally spotting that pot of gold at the end of the rainbow. In other words, it may seem like a fantasy. While your individual retirement goals are different from your neighbors’, follow these four simple concepts diligently and you will absolutely retire with confidence. Saving enough for retirement is simple. Not easy. Simple.

    “The ability to discipline yourself to delay gratification in the short term in order to enjoy greater rewards in the long term, is the indispensable prerequisite for success.” Brian Tracy, Leading Speaker, Author and Entrepreneur

    Featured photo credit: betacam via freeimages.com

    More by this author

    4 Simple Ways to Save Enough for Retirement These 8 Everyday Financial Worries Have One Common Solution 10 Online Financial Calculators You Never Knew That Could Make Your Life Easier 8 Crucial Financial Moves To Make In Your 30’s

    Trending in Money

    1 The Best Ways to Save Money Even Impulsive Spenders Can Get Behind 2 How to Answer the Tough Question: What are Your Salary Requirements? 3 How Personal Finance Software Helps You Get More Out of Your Money 4 The Definitive Guide to Get Out of Debt Fast (And Forever) 5 35 Real Ways to Actually Make Money Online

    Read Next

    Advertising
    Advertising

    Published on November 20, 2018

    The Best Ways to Save Money Even Impulsive Spenders Can Get Behind

    The Best Ways to Save Money Even Impulsive Spenders Can Get Behind

    The truth is, there are many “money saving guides” online, but most don’t cover the root issue for not saving.

    Once I’d discovered a few key factors that allowed me to save 10k in one year, I realized why most articles couldn’t help me. The problem is that even with the right strategies you can still fail to save money. You need to have the right systems in place and the right mindset.

    In this guide, I’ll cover the best ways to save money — practical yet powerful steps you can take to start saving more. It won’t be easy but with hard work, I’m confident you’ll be able to save more money–even if you’re an impulsive spender.

    Why Your Past Prevents You from Saving Money

    Are you constantly thinking about your financial mistakes?

    If so, these thoughts are holding you back from saving.

    I get it, you wish you could go back in time to avoid your financial downfalls. But dwelling over your past will only rob you from your future. Instead, reflect on your mistakes and ask yourself what lessons you can learn from them.

    It wasn’t easy for me to accept that I had accumulated thousands of dollars in credit card debt. Once I did, I started heading in the right direction. Embrace your past failures and use them as an opportunity to set new financial goals.

    For example, after accepting that you’re thousands of dollars in debt create a plan to be debt free in a year or two. This way when you’ll be at peace even when you get negative thoughts about your finances. Now you can focus more time on saving and less on your past financial mistakes.

    Advertising

    How to Effortlessly Track Your Spending

    Stop manually tracking your spending.

    Leverage powerful analytic tools such as Personal Capital and these money management apps to do the work for you. This tool has worked for me and has kept me motivated to why I’m saving in the first place. Once you login to your Personal Capital dashboard, you’re able to view your net worth.

    When I’d first signed up with Personal Capital, I had a negative net worth, but this motivated me to save more. With this tool, you can also view your spending patterns, expenses, and how much money you’re saving.

    Use your net worth as your north star to saving more. Whenever you experience financial setbacks, view how far you’ve come along. Saving money is only half the battle, being consistent is the other half.

    The Truth on Why You Keep Failing

    Saving money isn’t sexy. If it was, wouldn’t everyone be doing it?

    Some people are natural savers, but most are impulsive spenders. Instead of denying that you’re an impulsive spender, embrace it.

    Don’t try to save 60 to 70% of your income if this means you’ll live a miserable life. Saving money isn’t a race but a marathon. You’re saving for retirement and for large purchases.

    If you’re currently having a hard time saving, start spending more money on nice things. This may sound counterintuitive but hear me out. Wouldn’t it be better to save $200 each month for 12 months instead of $500 for 3 months?

    Advertising

    Most people run into trouble because they create budgets that set them up for failure. This system won’t work for those who are frugal, but chances are they don’t need help saving. This system is for those who can’t save money and need to be rewarded for their hard work.

    Only because you’re buying nice things doesn’t mean that you’ll save less. Here are some rules you should have in place:

    1. Save more than 50% of your available money (after expenses)
    2. Only buy nice things after saving
    3. Automate your savings with automatic bank transfers

    These are the same rules that helped me save thousands each year while buying the latest iPhone. Focus only on items that are important to you. Remember, you can afford anything but not everything.

    How to Foolproof Yourself out of Debt

    Personal finance is a game. On one end, you’re earning money; and on the to other, you’re saving. But what ends up counting in the end isn’t how much you earn but how much you save. Research shows that about 60% of Americans spend more than they save.[1]

    So how can you separate yourself from the 60%?

    By not accumulating more debt. This way you’ll have more money to save and avoid having more financial obligations. A great way to stop accumulating debt is using cash to pay for all your transactions.

    This will be challenging, depending on how reliant you are with your credit card, but it’s worth the effort. Not only will you stop accruing debt, but you’ll also be more conscious with what you buy.

    For example, you’ll think twice about purchasing a new $200 headphone despite having the cash to buy them. According to a poll conducted by The CreditCards.com, 5 out of 6 Americans are impulsive spenders.[2]

    Advertising

    Telling yourself that you’ll have the discipline to not buy things won’t cut it. This is equal to having junk food in your fridge while trying to eat healthy–it’s only a matter of time before you slip. By using cash to make your purchases, you’ll spend less and save more.

    A Proven Formula to Skyrocket Your Savings

    Having proven systems in place to help you save more is important, but they’re not the best way to save money.

    You can search for dozens of ways to save money, but there’ll always be a limit. Instead of spending the majority of your effort saving, look for ways to increase your income. The truth is that once you have the right systems in place, saving is easy.

    What’s challenging is earning more money. There are many routes you can take to achieve this. For example, you can work long and hard at your current job to earn a raise. But there’s one problem–you’re depending on someone else to give you a raise.

    Your company will have to have the budget, and you’ll have to know how to toot your own horn to get this raise. This isn’t to say that earning a raise is impossible, but things are better when you’re in control right? That’s why building a side-hustle is the best way to increase your income.

    Think of your side-hustle as a part-time job doing something you enjoy. You can sell items on eBay for a profit, or design websites for small businesses. Building a side-hustle will be on the hardest things you’ll do, be too stubborn to quit.

    During the early stages, you won’t be making money and that’s okay. Since you already have a source of income, you won’t be dependent on your side-hustle to pay for your expenses. Depending on how much time you invest in your side-hustle, it can one day replace your current income.

    Whatever route you take, focus more on earning and save as much as possible. You have more control than you give yourself credit for.

    Advertising

    Transform Yourself into a Saving Money Machine

    Saving money isn’t complicated but it’s one of the hardest things you’ll do.

    By learning from your mistakes and rewarding yourself after saving you’ll save more. What would you do with an extra $200 or $500 each month? To some, this is life-changing money that can improve the quality of their lives.

    The truth is saving money is an art. Save too much and you’ll quit, but save too little and you’ll pay for the consequences in the future. Saving money takes effort and having the right systems in place.

    Imagine if you’d started saving an extra $100 this next month? Or, saved $20K in one year? Although it’s hard to imagine, this can be your reality if you follow the principles covered in this guide.

    Take a moment to brainstorm which goals you’d be able to reach if you had extra money each month. Use these goals as motivation to help you stay on track on your journey to saving more. If I was able to save thousands of dollars with little guidance, imagine what you’ll be able to do.

    What are you waiting for? Go and start saving money, the sky is your limit.

    Featured photo credit: rawpixel via unsplash.com

    Reference

    Read Next