If building a nest egg has been on your mind (and it should be!), the following tips can help you start saving for retirement. In addition to these pointers, our financial planners can show you how putting aside just a little today can help you secure a successful, comfortable retirement, at whatever age you choose.
How to Save for Retirement
- Develop your financial plan first, then build your life around it. Too many people do the opposite and find themselves woefully behind on saving for retirement.
- Start saving for retirement early. Compound interest is king and the math is simple—set aside $10,000 when you are 25 years old, it has 40 years to grow based on an average retirement age of 65. On the flip side, a 60-year old setting aside $10,000 only has five years to see growth.
- Throw in a couple annuities. While somewhat conservative, they provide long-term payout upon maturity, guaranteeing you will not outlive your money.
- Diversity is key. Get involved with companies both large and small, domestic and foreign. To determine specifics, you’ll need to review your current age, assets and tax bracket with a planner.
- Don’t neglect your 401K. Typically an integral part of most retirement savings, maximize your 401K contributions to take advantage of your employer’s matching. It is never too late. If you are above the age of 50, you can even make “catch-up” contributions.
- Mutual funds. Made up of a pool of investments, a mutual fund provides a stable element to a retirement strategy because the diversity of funds makes it less likely to be impacted by market fluctuations. They are an effective, and easy, path to diversifying your portfolio.
- Ride out the storm. If you start investing in your twenties, experts say you can expect to see at least eight market downturns. Don’t panic—the stock market can fluctuate wildly in the short term. As investment guru Warren Buffet suggests, “You should expect a 6-7% annual return in the stock market over the long term.”
How to Determine When to Retire
- Determine your projected retirement budget and try living off it for six months…if you can't go without tapping your savings or credit cards, you may not be ready yet.
- Without an employment benefit, you’ll have to cover your health care insurance costs until Medicaid kicks in at 65—a big factor for establishing your retirement budget.
- If you still have college-aged or financially-dependent kids, you’ll have to be sure you’re able to afford your lifestyle and theirs once retired.
- Are your debts in the rearview mirror? If you are still paying off your home or have substantial debt, putting off retirement may be a wise choice.
Get a smart start saving for retirement. The Partner Colorado Credit Union financial experts can help you determine how and when to plan for retirement. To learn more, click here.