Three essential questions to answer as you save for retirement
What does it mean to retire?
Retirement can be defined as being able to live comfortably without drawing a paycheck from a job. When you can live on the money youâ€™ve set aside from working over the course of years actively working, youâ€™ve probably hit the point of retirement. â€œThe U.S. Census BureauÂ data shows thatÂ theÂ average retirement ageÂ in the United States is about age 63â€, according to thebalance.com. In order to get to the point of retirement, The Motley FoolÂ says that you need to have saved on average $930,600. This being said, doing what you can do right nowÂ to start prepping for the day you can kick off your shoes, sit back and relax, is important to jumpstart your future retirement. Â
Are you on track?
Saving for retirement may seem silly for the younger generation, but if not started early, lack of savings can lead to low income in later years. According to CNN, â€œAbout 66% of people between the ages of 21 and 32 have absolutely nothing saved for retirement.â€ So, the question that lingers is, when shouldÂ you start? How much should you save? The ideal answer is to start putting money aside in your 20s and as a general rule of thumb, NerdwalletÂ recommends â€œan annual retirement savings goal of 10% to 15% of your pre-taxed income.â€
How do you start preparing for retirement?
If you havenâ€™t started yet, good news! Better late than never. Here is a list of three things you can do to get yourself back on track:
- Take advantage of your companies 401 (k) matching program. For example, if your company offers a 3% match, and you put 3% of your income into your 401 (k), they will match it and add an additional 3%. If your company offers 6% matching, take full advantage of it as that money adds up quickly and with time, can provide you with a solid financial padding. After all, whatâ€™s better than free money?
- Start thinking about your retirement needs. Will you be renting or owning a home? Will you need to set aside a travel budget? Write down what you think you will need to budget for in the coming years and start saving accordingly.
- Create a debt repayment plan. Forbes.com says, â€œLook at your monthly income and order your debts by priority to make a smart repayment plan. It’s a good idea to create a debt repayment plan while also setting aside some money for the future. In the beginning, this can be a very small amount.â€ Simply put, this means minimizing your debt as quickly as you can to help free up money in your older years. Strive to enter retirement debt free â€“ itâ€™ll help saveÂ you on stress, too.
What tactics will help ensure a happy retirement?
In order to maintain your lifestyle in retirement, you must be able to have a steady flow of income.
Maximizing your social security is a great start. Starting your retirement before you reach full retirement age (about age 66 or 67), can boost your income. More and more, people enjoying retirement are thinking outside the box to keep money flowing. Things like renting out your space using AirbnbÂ while you are on vacation and signing up to be a part-time driver with UberÂ or Lyft, can help keep retirees busy and helps to pad the bank account in their spare time.
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