We all know that saving for retirement is important, right? Yet somehow in the hustle of everyday life and in the face of other financial priorities (paying off debt, buying a home, saving for college), it can take a back burner. Sometimes just getting started (in doing anything, not just saving for retirement) can be the hardest step! Check out these smart ways to start saving for retirement.
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Yes, you heard me- NOW! I don’t care if you are 22 or 52, the time to start saving for retirement is always NOW. And getting yourself into the habit of saving sooner rather than later will pay dividends down the road (literally) because of the magic of compound interest. Bonus tip: the earlier you start, the longer your money has to compound- which means you’ll have more cash to play with in retirement.
2) It’s Ok to Start Small
Even if you only save a small amount per month, you have to start somewhere. Especially if you start saving for retirement in your 20s or younger, you may not have a lot of money to put away for retirement when you first start saving. At this stage of the game it’s almost as important to get yourself into the habit of saving as it is to actually save!
3) Make it Automatic
Think you don’t have any spare cash to save? If that’s the case for you, then forcing yourself to save by making it automatic is probably a good idea. The awesome benefit of automating your savings is that pretty quickly you’ll get used to having less money in your paycheck, and you won’t even miss it! It’s easy to automate your retirement savings in most employer-sponsored retirement savings plans, and you can do this with other types of retirement savings plans as well. My favorite FREE online resource to help you manage/budget your money and plan for retirement is Personal Capital (review here).
4) Increase the Amount That You Save Over Time
An easy way to trick yourself into saving more over time is to start by putting away only a small percentage of your income and increase it by 1 or 2 percent a year until you reach your goal (15-20% is often suggested these days). If you are wondering where this “extra money” might come from, try decreasing your fixed expenses, find ways to make money in your spare time, and do your best to save as much as possible on things like car insurance from Youi.
5) Make it a Priority
Saving for your retirement needs to be one of your top financial priorities. As parents we often tend to put our children’s needs first (i.e., saving for college), but this is one instance where you’ll want to think hard about putting your own needs first. It’s like they say on the airplane about the air masks: You need to take care of yourself before you can take of anyone else. Sometimes the best thing you can do for your children is take care of yourself! That is most certainly the case with saving for retirement.
6) Get all the Free Money You Can
Ask most any person out there and they would tell you that they would love to get their hands on some free money. Guess what? Many of you with employers can! If your employer offers a 401(k) with a match, you need to be contributing at least to the point of the match. Failure to do this means you are literally turning down free money!
7) Start a Roth IRA
If you are contributing to your employer-sponsored plan at least to the point of the match and have extra money to put away, it’s a good idea to consider starting a Roth IRA. You contribute to a Roth IRA with post-tax dollars, meaning that when you withdraw it in retirement you will not have to pay taxes again. It’s one of the best deals around in terms of retirement accounts.
8) Max Out if You Can
This is not always an option for everyone saving for retirement, especially when you are first starting out, but if it’s possible for you, your future self will thank you if you max out your retirement accounts now. Maxing out your accounts has multiple advantages, including taking maximum advantage of the tax benefits and reaping maximum value from compound interest.
Suggested Reading: I think a good comprehensive guide to retirement planning can be found in The Bogleheads’ Guide to Retirement Planning (affiliate link), if you are interested in reading more on this important topic.
What do you think? Can you think of any other great tips on how to start saving for retirement?
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CMF’s favorite FREE money management tools!
Some of the best online tools out there for money management are at Personal Capital, and the awesome news is that they are all FREE! Cash flow tracker, 401(k) fee analyzer, investment checkup, net worth monitoring, and many more! I’m a net worth junkie, so the net worth monitor is my favorite. Check out my Personal Capital review here, or click here to check out all the awesome tools for yourself!