According to the most recent data, 1 in 2 Americans reaching retirement age will not have enough money, and 1 in 4 American seniors live in poverty according to international standards.
In large part, financial experts believe this is a double cause-and-effect scenario. Employers are no longer funding pension plans for their employees. Each generation after the Baby Boomers did not receive the financial know-how to fund their retirement plans. Add to their lack of financial understanding the Covid-19 pandemic, inflation, and major overhauls in the American workforce, and it’s visible that Gen Xers and future generations will need to develop some serious financial skills (or invest in financial accountants, advisors, and coaches) to come out of this on top.
If you’re nearing retirement, you may already feel the squeeze. Maybe you’re worried it’s too late. Perhaps you’re asking how you can save enough for retirement when you, like many Americans, are living hand-to-mouth, paycheck-to-paycheck each month. So what can you do?
This article explores 5 Ways You Can Begin to Save for Retirement, outlines some additional resources, and mentions those who can help you on this journey.Â
5 Ways You Can Start Planning for Your Retirement Today
Step 1: Consider Your Current Living Expenses
Will these go up or down when you reach retirement age? Build a retirement budget based on your current needs. It’s never too early. It is estimated that the average person should have 10 to 12 times their average annual income saved up before retirement.Â
Step 2: Set a Goal
Considering your current financial picture and annual income, estimate how much you should have saved for retirement by age 65. Where are you now?Â
Do some simple calculations. Divide The amount of money you need at retirement (age 65 for our purposes) by the number of years remaining until you’re 65. It is okay to use other ages. We are just using this one as it’s a generally acceptable age for retirement.Â
How much do you need to save each month without considering other factors?Â
If you have a retirement account with a company match and interest, how much of that will come from your employer? Subtract that amount from your calculations to get the new annual savings goal. Then divide that by 12 to get a monthly goal. Keep that number in mind as we move to step three.
Step 3: Consider Your Income Streams
Every working American has income and expenses. Sometimes your job pays well and you have money left over. Other times you may need to pull pennies out of your couch to pay the potter. Whatever your situation, having additional money streams can be a blessing when funding your retirement plan.Â
What odd jobs, side hustles, secondary income streams, or side gigs can you take on to help meet your monthly goal for retirement? What skills do you have to put to use for your benefit? Maybe you can mow lawns in your neighborhood, sell books online, or pick up part-time administrative work at your local church, learning center, or hospital.Â
Whatever it is, make it part of your plan. I have heard of friends pet sitting, selling gently used items online, and picking up babysitting hours to get out of debt, build an emergency fund, or save for a vacation. You can do this for retirement planning too!Â
Step 4: If You Don’t Already Have a Retirement Account, Talk to a Financial Advisor and Open One Today
Did you know you can open a retirement account through a financial advisor? Confession: I learned this just a few weeks ago. I learned this from my daughter. A few years ago she took a financial literacy class and her instructor said he would match up to $1,000 for any student who opened a retirement account. So she contacted her grandparent's financial advisor and asked them to help her account. Her instructor matched the contribution as promised. In two years that account has grown by 50% because each semester, and each paycheck, she adds funds to her retirement plan.Â
Did you know that if you invest $150 per month from age 25 to 65 (with a return rate above 10%) there’s a good chance you not only will have enough money for retirement, but you will also likely retire as a millionaire. It sounds crazy, right? But it’s not. Ask your financial advisor to help you do the math.Â
While talking with your financial advisor or tax professional, ask them for a health checkup on your retirement planning, or to help you start your retirement account. The process is straightforward. Once you’ve done it, you will be on your way to having a healthier financial future, and that's something to smile about, which brings me to our last step.Â
Step 5: Commit to the Process
By now you know…
Your average annual income.
Your average annual expenses.
Your estimated annual retirement savings goal.
Your estimated monthly retirement savings goal.
Your skillset for earning extra money to put toward your retirement.
Your roadmap to a healthy retirement account.Â
If you’ve made it this far, it’s time to commit to the process.
What does that look like for you?
For some of us, that means going ahead and getting a second job, creating flyers for pet sitting, or sharing with contacts that we are taking on freelance work. For others, we might need to set up automatic deposits into our retirement accounts so we aren’t tempted to spend it or increase our current lifestyle.
Whatever helps you get from where you are to where you desire to be when you retire, commit to the process. Is it going to be challenging? At times, for sure. Will it be worth it to retire with dignity, peace of mind, and an opportunity to enjoy life without too much financial stress? Absolutely!Â
I have one last step for you: IMAGINE.Â
What will you do with a healthy retirement plan, no major debts, a paid-off house, and time to enjoy your family, friends, and the beautiful world?
Soak it all up. Use this step to create a vision of what you want your future to look like when you retire, and create something you can look at often. It will give you the motivation you need to keep going when that pocketbook wears a little thin.Â
You can do this, and TNH Financial Services is here to help you. We can provide you with resources, financial planning connections, and more. If you’d like to talk, give us a call or send us an email.Â
Here are a few more resources for you:
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