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?
Photo Credit: stock photo
$91,000 vs $216,000. What a difference one decade makes when it comes to saving for retirement!
It is a big difference. Here’s the problem with looking at future piles and pie-in-the-sky numbers.
Inflation.
Let’s assume the real rate of inflation stays at what it is now….(and doesn’t get a LOT worse when they start having to print money to cover SS/Medicare funding shortages….which is most likely how they will solve the problem) Around 6%, according to John Williams at ShadowStats….not the phony cooked numbers the govt manages to come up with to avoid COLA raises in things like Social Security.
That means 35 years from now, purchasing power of 216k will have cut in half 3 times (Rule of 72)…..so 108k, then 54k, finally around 27k.
So at 65, you’ll have this $216,000 that has the purchasing power of $27,000 today.
How long would you retire on 27k today ?
Thanks for clarifying Tnandy. I know Len talks about time value of money and the dollar being a poor store of value but I didn’t realize just how poor a store of value it is!
Yeah, it’s true that inflation is gonna get in our way pretty badly. This is why I think having a small biz to fund some of your retirement years can make a lot of sense. Or retiring in an area where life is cheaper.
If all goes well, we’ll prolly retire at our village house, get a lot of money by renting the city apartments and earning few bucks online as well (I’d die of boredom otherwise :)).
“Reconsider your priorities”
I love this advice. Not just for saving for retirement, but for stabilizing up your financial position in general. Too many people wonder why they can just barely make ends meet, then they drive home from work in their brand new car (stopping to pick up a pizza on the way, because, who has time to cook at home?), sit on their leather sofa, and watch their cable tv programs (most likely on their new flat screen tv set).
If more people would practice the thrifty values that, I believe, most of this websites readers do, the world would be a far happier place.
If one thinks of life as a continuum where there does not have to be a discontinuity or transition from “working” to “retired”, there are ways to enjoy life more fully right into old age. One key is to redefine in one’s mind the concept of “saving”.
What if you “save” something besides, money – something you can use independently of it, throughout your life?
Andy and (and many others) I have done it by “saving” land and the means to produce sustenance from it.
“What if you save something besides, money something you can use independently of it, throughout your life?”
THAT is an excellent way to beat the devaluation of paper money ! We bought the side of a mountain in the early 80’s, built our home from lumber from timber on the property. The land provides much of our food (via our work), all of our water, sewage disposal, most of our heating fuel (wood), most of our electric power (solar) and so on…….meaning we need a lot less paper money to live.
Where does one start finding accts with 12% returns? Asking for a friend(wink wink)
Insightful post indeed!
In my opinion, when planning for retirement, the truth is that the earlier you start saving and investing, the better off you will be. If you want to save for retirement then it is better to focus on starting today. Especially if you are just beginning to put money away for retirement, start saving and investing as much as you can now. The more you can invest when you are young the better off you will be when you are old.
I would also recommend that anyone would use about 10% of their income and invest it into cryptocurrencies. I would invest 30% of that money in the top 5-10 cryptos out there and the rest into 20-30 of the less known ones. This would diversify the risk and increase the potential of buying into a crypto that will grow considerably in the next years. This is not a strategy for the short term but should be considered for at least 3 if not 5 years. What is your opinion, Len?
I think cryptocurrencies are a purely speculative play and would avoid them entirely.