How to Save for Retirement — and When to Start
Few things can cause anxiety like the fear of not having money for retirement. Fortunately, with the economy on an upswing, Americans are saving more for their golden years. But don’t get complacent — nothing is as important as having a well-thought-out plan. Citizens National Bank is here to help with a few tips for conquering the savings game.
Save Early and Often
Ideally, you begin saving upon entering the workforce in your 20s. The goal is to save around 15% of your income for retirement. The sooner you start, the better. Compound interest allows your retirement fund to grow substantially over time, and more time saved means larger growth. The easiest way to ensure regular savings is through auto-deposit from your paycheck.
Set a Goal Number
Don’t underestimate budgeting. Experts say you’ll likely need 70% of your pre-retirement income to manage your later years. Consider how you want to live post-retirement, what your expenses will be and how much you will need to cover them. Factor in any additional sources of income you may have, like Social Security, property, or an inheritance. Here is an online calculator to help you get started.
Explore Your Account Options
Your best picks are 401(k)s and individual retirement accounts (IRAs). Both allow you to delay paying taxes on your savings contributions until retirement. Many employers offer retirement accounts, so check if you are eligible if you haven’t signed up already. No plan? No problem. You can set up an IRA through a bank or brokerage.
Invest, Invest, Invest
One of the best ways to build savings is through investing in stocks. Index funds are the cheapest, most stable options, not likely to go through dramatic ups and downs. Build your portfolio with at least 75% in stocks. The other 25%? Bonds, which have greater protection from the fluctuations of the market.
Revamp your plan annually. Check your budget. Are you saving enough? If not, reconsider how you are diverting your income. Prioritize retirement above all other savings. That money will be hardest to recoup if you do not have enough when the time comes. As you grow older, shift more money into bonds while still maintaining a healthy dose of stocks — even into retirement.
Talk to an Expert
Saving for retirement is a process that literally takes (almost) your whole life. It can be scary and confusing, especially with all the financial jargon that fills conversations about it. But don’t worry — there are people who can help. Set up a meeting with a financial professional to discuss your goals and figure out the strategy that works best for you. There are a number of important ways they can help.