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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1) Start NOW
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
What do you think? Can you think of any other great tips on how to start saving for retirement?
P.S. If you liked this post, you might enjoy using our free Net Worth Calculation Template. Sign up now to receive each new post delivered to your inbox, and we will email you the template! Sign up here.
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!
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Starting now, even if it is small is key. I started with $20/paycheck and was amazed at how it grew. Remember, huge trees come from small seeds. You just have to give it time to grow into a big tree. The same idea applies to investing too.
So true! The best time to start saving for retirement is yesterday, the next best time is today!! No matter how small- those little amounts can grow pretty big if you invest consistently and give it enough years!!
Definitely start NOW! It’s easy to keep putting it off, but the longer that happens, the harder it is to start and the more you have to put away! It’s a scary fact that many Americans don’t have enough saved for retirement. I don’t want to be in the boat.
I always find it so unbelievably scary when I hear stats about how little the average American has in retirement savings!!
Making retirement contributions automatic has been the key to my success. I think it’s important to pay yourself first, especially with respect to retirement.
I think automation is so important. After a while you don’t even miss that money from your paycheck. It helps to make it automatic early on because then it becomes a habit and there’s more potential to accumulate a greater amount.
I am in my 20’s and I havent started saving every time I start some emergency comes up and I spend it. But I feel like the making it automatic is a good idea
I would encourage you to make it automatic! That’s a great way to take the decision of whether or not to save for retirement “out of your hands” every month, since you set it up once and don’t usually have to do anything to keep it going. It IS however a good idea to revisit your retirement contributions at least once or twice a year and increase if you can. Good luck!!
Thanks so much for your advice ! I can take any that anyone is willing to give
I’m planning to start a retirement account as soon as I get a stable full time job after college. I love the idea of compound interest and it’s better to start as soon as possible to get better return!
Too true!! Definitely start as soon as you are able!!
That’s exactly what I had to do. When you really look at it, you realize how simple it is. You just have to do it.
Well said!
These are all great tips. Other than that, just start saving! Getting it deducted from your paycheck at work is easy and painless.
It’s so easy if you have an employer that offers a retirement plan. It’s definitely something to take advantage of!!
Great tips Dee especially about taking advantage of the employer match. That’s free money right there! Never should pass that up.
I know, right? What’s better than free money???
Saving for retirement is one financial mistake I didn’t make. I started saving with my first paycheck at my first office job in college (where they offered a match even though I was only part-time). Since then I’ve continued saving in my employer sponsored 401K to get the match every time. I even rolled my first 401K into a private IRA when I left my job after college.
You go girl!! That’s going to pay off big time one day.
We have been talking a lot about this in our house. We need to up the automatic reduction.
Do it! What are you more likely to regret- upping your contributions now, or NOT upping it now??? Unless it’s going to cause you significant financial hardship, I’d put in as much as you can.
Awesome tips, Dee. My mom started late and started small. She wasn’t able to save a ton before retirement, but that little nest egg has come in very handy. The other huge thing she has going for her is that she paid off all debt. This makes her monthly expenses very low.
Being debt free is HUGE in retirement! The lower you can get your expenses the better. It sounds like your mom is living proof that when it comes to saving for retirement, it’s never too late to start.
Just start now. Don’t wait until you have enough money to invest or you will never have enough to be rich and you will have regrets down the road. Anything you can save is a start and then educate yourself about finance so you are not afraid of the market or investing down the road. You owe it to yourself to continue your financial education for life.
Agreed! If you wait until you “feel like you have enough money,” that day may never come! Better to start with at least a little bit now and work it up over time.
Start now, that’s tip #1 and it makes sense to be a high priority. Compounding is what supercharges growth in net worth, and time amplifies that effect. Thus, its important not to procrastinate and to just get started.
Exactly! I think the thought of not being able to contribute much at first is what holds some people back from starting. But those dollars that you sock away early will grow to much more later on!!
I always like starting small with every goal I have. When I try to do too much at once, I usually end up failing and feel worse about how the outcome will be.
Great point. With saving for retirement, I think that the most important thing is just to start as soon as possible. If you try to start at a really high savings rate like 25% it you’ll probably feel it way too much in your finances and quickly give up on it. The key is to start small, with even a little amount, and slowly ratchet it up over time.
Great tips. So many people say no to #6. It’s so hard to believe some people turn down FREE money! Slow and steady wins the race.
Exactly. Nothing better than free money, definitely can’t pass that one up!
Great tips. I like making it automatic. This makes my life a lot simpler. Thanks for sharing.
Yes to employer matches! You are so right that, if you have a match available to you, you should 100% take advantage of it! Mr. FW and I both contribute the federal max to our respective 401Ks–it’s just such an easy way to save, as long as you can swing it every month.
Excellent! We max ours out too (or at least we did both when I was still working; now just Mr. CMF’s). We think that maxing it out at this age (30s/40s) will lead to huge benefits down the road!
Good points. And I’d agree that we all need to have some savings for when we are older and we can’t work. Still I believe that when we are older we don’t need pension we need income. This changes the perspective on retirement completely, I find; since we started thinking like that my intire focus is not on saving (not only and simply) but on creating income.
So true, and here in the PF world we have a lot of folks who would like to retire early- creating additional streams of income becomes even more important if this is your goal!
A lot of people talk about cutting bigger expenses or doing more extreme things like moving or selling your car, but I really believe that it’s the small things that add up over time. Like buying 1 less coffee per week or just using sales to save an extra $10 a week. It’s not big chunks of money but it’s good financial habits that keep people more mindful of their expenses so they never get out of control. Over time when you see those small amounts grow into larger amounts is when it really starts to click for most people.
“It’s not big chunks of money but it’s good financial habits that keep people more mindful of their expenses so they never get out of control.” <-- Love this! I think it's the habits that are most important. An expensive coffee a week for thirty years adds up to a lot of money!
I’m making sure we save for retirement. I figure since we are so young, if we save a lot now, there will be more money to compound over time.
Excellent! I’m willing to bet that one day you will look back and feel like starting so young is one of the best decisions you’ve ever made 🙂