Yesterday was the first day of spring. Most of us are familiar with the term “spring cleaning”. You go through your belongings and get rid of items you no longer use or need. Don’t just view spring cleaning as a time for renewal in your home, also view it as a time of renewal for your finances.
Look at your retirement accounts and see if you can add an extra bit. Push up your 401k savings contribution by 1%, you won’t miss the 1% in take-home pay I promise. Do you not contribute the maximum you can to an IRA? If not, see if you can contribute an additional $10 a month towards the account. Again you won’t miss the money and it will go a long way in the future by compounding with itself.
Clean Your Expenses:
Do you have a gym membership you don’t use or other unnecessary expense eating away at your budget? Well now is the time to cancel that unused membership or eliminate that frivolous purchase to free up more money in your budget to allow you to do something you truly enjoy. Finding a way to clear an additional $20 every month can help pay for a weekend getaway during the summer months.
Less is More:
We often hear about this in terms of possessions, the fewer things you own, the clearer your mind can be to focus on your passions. The same goes for your finances. The fewer expenses you have, the more time you can spend enjoying the money you do have. Do you have an outstanding loan you are only paying the minimum balance on? Focus on getting it paid off and that will be one less item eating away at your budget.
There is a retirement crisis currently underway. Why is this? Because people don’t save during their working years to fund their golden years. The Economic Policy Institute recently released is a startling report about American’s retirement savings.
The graph above shows the median account values of retirement savings for a given age group. The overall median among all age groups is a meager $5,000 while the median value for those closest to retirement, 56-61 age group, have only $17,000 saved up.
To put this in perspective, I am 26 years old and have been employed full time for less than 4 years. In my retirement accounts, which include a company 401k, a rollover IRA and a Roth IRA, I have $47,589 saved.
Retirees are relying on Social Security by larger percentages these days. Nearly 2 out of every 3 retirees rely on Social Security for at least 90% of their retirement income. No matter your current age, there are ways to ensure that you are setting yourself up for success in your later years. Here are the steps I followed to have my current retirement savings:
Fund a Company 401k and get a full employer match. This should be a no brainer. Fund your company’s 401k plan at least to the amount that will maximize your employer’s match. It’s FREE MONEY.
Start an IRA. I prefer a Roth IRA because it is money you will never be taxed on again, and is a good complement to a 401k (which you will pay income tax on in the future). Go to Vanguard’s website and get one started in a matter of minutes.
Maximize out your 401k. If you are under 50, you can contribute up to $18,000 of your pre-tax pay to a 401k. If you are over 50, you can contribute an additional $6,000. See if you can contribute an additional 1 or 2 percent each year until you reach the maximum.
Planning for retirement is now more important than ever. Many don’t have pensions to rely on anymore, so the responsibility is now on YOU to determine your retirement destiny.