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For many people, retirement is the second American Dream. But it’s a dream that can feel unattainable or difficult to reach. It doesn’t have to be. Saving and preparing for retirement is possible for everyone—here are five stress-free tips that can help.
1. Social Security Will Help, But it Probably Won’t be Enough
The average Social Security benefit in 2020 is $1,503 per month, which is $18,036 annually. If you have paid off your mortgage and have little or no debt, this could be enough money to live off of. However, for most people, you will need your own personal savings in addition to what you receive from Social Security to live comfortably.
How much you receive from Social Security depends on annual income and the age you begin to collect, so it’s different for everyone. But it’s nice to know that you’ll be getting something and that you can supplement your social security income with retirement savings. Even if you are getting close to retirement, there are still savings strategies to help you achieve the quality of life that you want.
There is no standard, one-size-fits-all retirement. Some people want to spend their time with family, while others go on road trips and cruises to explore the world.
As you prepare to save, you should develop a high-def picture of your lifestyle goals for retirement. This gives you a starting point for planning, and it will help you determine how much money you’ll need by the time you retire.
For example, smaller goals, like taking a cruise every winter, are more affordable investments and will only cost you several hundred dollars in your annual budget, while larger goals like moving homes, frequent road trips to visit family, or exploring the world require a much larger retirement fund to make sure you can still live comfortably.
As you prepare for retirement, make it a priority to pay off your debt as soon as possible. Once that money is no longer tied up, it can be put to work for you to build the retirement lifestyle you want.
If you are struggling to get out of debt, consider using one of the many financial apps and tools that are available for free. Programs like Qoins, Debt Manager, and Debt Payoff Plannerare built to help you calculate and find a way to pay off your debt. There are even communities on social media you can reach out to that are all about being #debtfree; these communities can help you see success stories and get helpful tips.
A good rule of thumb is to save at least 15% of your gross (before taxes) income for retirement. Part of this should be going toward employer retirement accounts. Accounts like 401(k)s and Roth IRAs are common examples and are both excellent ways to build long-term retirement savings. For example, they can give you tax advantages, and many employers offer a matching 401(k) program (they match your contributions up to a certain dollar amount or percentage point).
And the longer you contribute to a 401(k) or Roth IRA, the more time your investment has to mature and generate interest. And then the interest it earns starts earning interest, and you can see how that starts to build up over 10, 20, or 30+ years.
5. Talk with Financial Advisers
Investing and planning for your retirement doesn’t have to be a solo sport. There are a lot of nuances when it comes to investing. Certified Public Accountants (CPAs), like those at Plante Moran, can help you control your tax bills. And Certified Financial Planners (CFPs) can be valuable in helping you with your budget. Investment advisers, like Fisher Investments, can be a source of information about what’s happening in markets. An investing adviser can also help you find investment opportunities that match your risk tolerance and needs.
When you meet with a financial adviser, be prepared to answer questions like:
● What are your most important financial concerns?
● What changes do you expect in the future that you wish to plan for?
● What are your most important non-financial concerns and objectives right now?
● What would you like to accomplish through financial planning?
● Why do you think you need help?
● What percent loss in your investment would cause you discomfort?
● Do you have a household budget?
Saving for your retirement doesn’t have to be stressful—in fact, the alternative would be much more stressful. The more time you give yourself to save and invest, the better chances you have of reaching your goals. Start working on reaching your retirement goals today.