Work for 30 years, retire, and enjoy your golden years, without doing too much to save for retirement because Social Security plans are enough; it may sound like science fiction now, but decades ago retirement planning was as simple as that for most people.
Today, with the baby boomers retiring and newer generations failing to close the demographic gap, smart retirement planning is a little different. In the US, saving for retirement is a must, unless you want to work forever.
Todays workforce is required to save and invest in order to ensure that they have a retirement planning guide, and can support themselves during their so-called “Golden Years.” However, for those with a limited income, such a task can seem impossible.
And yet, think about it: If it’s difficult to save for retirement now, when you have at least some income, how will you survive when that income is gone? With that in mind, here are some quick ideas to plan for your retirement:
Reconsider your priorities
“Lifestyle creep” or “lifestyle inflation” describes the same weird phenomenon: once we start earning more money, we find new “needs” we never had before. Living this kind of lifestyle will prevent you from saving money because instead of keeping your extra income, you’ll end up looking for endeavors that will require you to spend more. Over time, this lifestyle can become the reason why you’ll see yourself having too much debt even if youre earning a lot of money.
Here’s a personal example: Ten years ago I was happy to have a small $100 point-and-shoot camera. But as soon as my income increased, I realized I couldn’t live without carrying a much fancier camera that cost ten times more. You know the story; chances are you’re overspending as well. So why not make an effort and cut back on this buying marathon? For example, don’t buy new gadgets, if the older ones are still perfectly functional. And don’t buy a new car every few years, if your current one is in perfect condition.
Instead of buying yet another piece of junk to clutter your house, use that cash to build your retirement saving account. Although it can be tempting to spend the moment you receive extra cash, discipline yourself to think long-term and save for your retirement. This process can be challenging, especially if you’re fond of buying impulsively all the time, but if youre looking forward to living comfortably during your retirement, saving money can eventually come off easy.
Start saving for retirement ASAP
Don’t wait until you’re 40 or 50 years old to start contributing — begin at age 30 or, even better, in your twenties. One of the biggest misconceptions people have when it comes to saving for their retirement is that they have all the time in the world to do it, that’s why a lot of them keep putting them off. This isn’t true because time flies by so fast, and the next thing you know, you only have ten years left before you retire.
If you want to live comfortably when you retire, make sure to start saving as soon as possible. The sooner you start with your efforts, the more money you can enjoy in your retirement. Saving early will also increase your chances of succeeding in your efforts because you’ll still have time to test out different strategies in saving, and figure out what works for you.
As an example of how long-term savings work, if you save $100 per month with an 8% annual return:
- you’ll have $216,000 at age 65, assuming you start saving at age 30
- you’ll have $91,000 at age 65, assuming you start saving at age 40
Use your company’s 401(k), get an IRA, a Roth 401(k), a Roth IRA, or any other type of retirement fund you can access to help you save. If your company provides one of these plans, then take advantage. About 20% of the Americans who don’t bother contributing are leaving money on the table each month.
Create a small retirement business
I know many retirees who are still working part-time. Some work as cashiers; others, women especially, earn money as nannies or maids. This allows them to earn a side income and also still feel useful.
I spent the last decade as a semi-retiree, working a few hours per day as a web designer. I also continue to run a small blog network that keeps me updated with the latest in SEO and design that provides me with a nice side income from sponsorships and ads.
If you’re planning to manage a small retirement business, make sure to consider all of your options carefully. There are many ways on how retirees can earn money, but you should choose one that aligns with your passion and lifestyle. It’ll be challenging for you to work during your retirement if you don’t have any interest in what you’re doing in the first place.
I don’t plan on fully retiring, since I can’t spend more than two days doing “nothing” business wise — as long as my brain is still functional, I plan on blogging until the end. I’m also repairing a house in a nearby village and plan on living there. And the rent from two city apartments I have should cover most of my retirement expenses.
So my savings, plus rent and online income, should allow me to live comfortably and also travel during retirement.
What plans do you have to save for retirement?
About the Author: Ramona is a small business owner and personal finance blogger who started and maintains Personal Finance Today.
Photo Credit: stock photo