While retirement may be decades away for you, it’s never too early to start preparing. If your plan is to live off of social security, you may find yourself struggling every month to make ends meet. Planning for retirement now can help to ensure that you have enough money to live off of comfortably in the future. Follow the steps below to help secure your financial future when you retire.
Know What You Need to Retire
To help you prepare for retirement, knowing what you need is half the battle. Start by estimating what you think your monthly expenses will be when you retire. From here, you can get a ballpark idea as to how much money you need to have to retire comfortably.
After this, consider what assets you own. Whether it is your home, savings accounts, or a retirement account, estimate their future net worth. If you compare what you have to what you’ll need when you retire, you will be able to identify your shortfall. This is where saving and cutting expenses come into play.
Start Saving Now
One of the best ways to prepare for your retirement is to start saving for it, now. If your employer offers a 401K retirement plan, make it a point to contribute a percentage of your earnings to it. Some employers may even match a portion of your contribution. If you are able to contribute enough to take advantage of the full employer match, do so. An individual retirement account, commonly known as an IRA, can be set up if your employer does not sponsor a retirement plan.
For those who are wondering how much to contribute to your retirement plan, a good practice to follow is 10% to 15% of your income. If this is beyond what you are able to do, then just contribute what you can. As your income rises, you can start to contribute more. If you are still struggling, consider what expenses you are paying for every month. Saving for retirement should be a prominent line item in your budget. Scale back unnecessary expenses and put the extra money aside for retirement.
Living Within Your Means
This is where a little discipline needs to kick in. If you are careful with how you spend your money, you will have more to save toward your retirement. Expensive homes, cars, and trips may seem like a great idea at the time, but they have a way of tying up, even wasting, and your money. Making sound financial decisions can go a long way in securing your future.
Maintain a High Credit Score
When you have a healthy core, you have a better chance of obtaining credit at a lower interest rate. This can be especially useful when you purchase a home or anything else on credit. Why is this important? A high credit score can keep your interest rate down. The less that you are paying toward interest, the more you can put aside toward your retirement. Your hard-earned money just becomes more effective.
Take Care of Yourself
What you do today can impact your health as you get older. Be sure to get regular check-ups at the doctor and adopt a healthy lifestyle. While this may not prevent you from getting sick when you are older, it can help you to avoid some health conditions such as diabetes and heart disease.
If you are wondering how taking care of yourself is a financial step, consider the cost of healthcare premiums and treatment. If you are sick, you can get hit with medical bills. It can also interfere you’re your ability to work. If you take care of your health, you can keep unexpected medical costs and health insurance premiums lower.
Even if you are years away from retirement, taking these financial steps can help you to secure your future. Choosing a balanced approach between saving and using your money responsibly, you can easily prepare for retirement without breaking your budget.