Can you believe we are more than halfway through September?! Pumpkin Spice EVERYTHING is back, which means it’s almost Halloween which means Christmas starts the day after and then it’ll be 2019 and then we’ll do it all over! Crazy, right? Wait a minute I know what you’re thinking: “Isn’t she supposed to be talking about retirement?” … Yes I am!
“So what’s with the pumpkin spice, rushed holidays, and everything else?”… I’m glad you asked! Just like this year has gone by incredibly fast, so will the next year and the year after and so on and so forth. Before you know it, you’ll be 60 years old, getting ready to retire and clock out of work for good. For E-V-E-R. That sounds nice, doesn’t it?
I know it’s hard to imagine, but that day will come and it’ll be faster than you think which is why you need to start saving for retirement NOW. You might be thinking: “Relax, I can barely plan what I’m having for lunch today.” Trust me I get it, lunch decisions are hard, I know. But in all seriousness, if you’re not saving for retirement, strongly consider it now.
Why do I need to save for retirement?
According to a Gallup poll, Americans project retiring around age 66. Depending on your health, family history, quality of life, along with other factors, how long you will live after you retire will vary. However, it’s not rare to see healthy individuals living through their 70’s, 80’s, and even making it to their 90’s.
So let’s just say you retire at age 65 and you live to be 88 years old. You will need to financially support yourself for 23 years. That’s quite some time. Most people want to keep up with their current lifestyle in retirement which can be hard to do without a job providing a steady income.
Think about it: when you retire, you will still need to pay for food, gas, rent/mortgage, your car, pets, medical bills, everything. The big difference will be you’ll need to do this all without your regular job.
This is why you need to save for retirement.
Sure, there are Social Security benefits that you can collect once you retire, but will that be enough to cover your needs? And do you really want to be in a position where that’s your only option? I wouldn’t want to which is why I’ve saved for retirement ever since I was 18 years old.
I wasn’t really sure what I was doing, and definitely wasn’t excited to be putting money away that I wouldn’t touch for 40 years at that age, but I’m glad I started young now. It doesn’t matter how old you are now, just do it! Your retired self will thank you later.
Okay okay, I’m convinced. So how do I do this thing?
There are different ways you can start saving for retirement, but I will go over a couple:
Enroll in your employer’s 401(k)
If you’re eligible to participate in your employer’s 401(k), do it. Most employers offer some kind of match of contributions to encourage you to save in the 401(k). This is also one of the most convenient ways for you, because it will automatically be deducted from your paycheck and deposited into your 401(k)!
Another big benefit of taking this route is the money is taken from your check before it’s taxed, which means that less of your income will be taxed now.
You should save as much as you can afford to (up to IRS limits — $18,500 per year in 2018), but at the very least take advantage of your employer’s matching contribution (if this is offered). Let’s just say your employer will match every dollar you contribute for up to 5% of your pay, save at least that full 5%. There aren’t a lot of places in life where you’ll score free money, so take advantage of it if it’s offered to you!
Open a Roth IRA
If your employer doesn’t offer a 401(k) or if you’re not eligible to participate, consider a Roth IRA (IRA = Individual Retirement Account). Roth IRAs are funded with money that’s already been taxed, however when you withdraw the money in retirement, it will be tax-free.
In 2018, the maximum amount you can contribute is $5500 per year. If you can’t save that much, save as much as you can. You can set up an automatic transfer from your bank account to your Roth to make sure you stay on top of making your contributions.
Hopefully you now know the importance of saving for retirement. The topic overall can be overwhelming and there is a lot of information and rules around these accounts, so you should do your research and due diligence before you set one up. A great place to start is your HR department at work. They can provide you with your company’s retirement plan details as well as all the rules and specifics you need to know.
Remember, the sooner you start the better!
Nothing on this blog should be considered personal actionable advice, research, or an invitation to buy or sell any securities. Consider all risks before investing, including the loss of your hard earned money. Vee is an Investment Advisor for Warren Street Wealth Advisors, this blog reflects her personal views, and not that of Warren Street.
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