Saving for retirement is a personal journey, and the approach you choose will often depend on your goals, your plans, and, of course, your generation. While young, eager Millennials, middle-aged Gen Xers, and aging Baby Boomers all have the same overall objective – to prepare for the future as best as possible – the path to retirement looks a little different for everyone.
Life as an adult, while frequently enjoyable, isn't always easy. Saving is a priority, but more immediate needs, like bills, emergency medical expenses, or even luxury purchases like a brand new car or an upgraded home, often take precedence over a reality that's still decades away. With this in mind, it's no wonder that 30% of Americans report feeling stressed and anxious about the road that lies ahead.
Nevertheless, planning for retirement shouldn't be anxiety-inducing. These tips can help you make sure you're properly preparing for life after employment.
Focus on Growth
The idea of saving enough for retirement can be daunting, especially for those who aren't big earners. However, there's an important concept you need to keep in mind: compound interest. Essentially, this refers to the growth of interest that occurs on both the principle and the interest earned. The more you have and the earlier you start saving, the more your accounts will grow – without you doing a thing. For every ten year period you delay saving, you'll need to invest three times more to meet your retirement goals.
Know Your Own Needs
For those saving for retirement, choosing a target can be a challenge. After all, there's no one magic number to which every adult should ascribe. With the lack of universal information available, it's easy to understand why 81% of Americans admit to being unsure about their savings goals, and many assume they'll only need around $500,000 – a figure approximately 50% short of the average cost of retirement. At the end of the day, no one person can tell you what you need. It's up to you to research and prepare accordingly.
Commit to the 3 Ps
Plan, prioritize, protect – the three Ps of retirement preparation. To retire successfully, you'll need to create a plan, prioritize savings, and protect your assets. The basics of a plan should start with your monthly income and expenses; experts suggest putting at least 15% of pay away over a thirty year period on a consistent basis. Further, it's important to keep at least some of your money in fixed income funds to protect against volatility, ensuring you still have access to cash if the market takes a dip. Confused on where to start? A financial advisor can help you create a strategy
Take Advantage of Employer Options
When you want to simplify your savings, an employer-sponsored plan is one of the best options. A 401(k) plan, for example, allows you to put money away pre-tax, minimizing the amount you pay to the IRS each year while simultaneously growing your savings. Some employers even contribute a small percentage to their employees' accounts, growing your balance without further savings on your end. If you're not sure about availability in your company, your HR department should know more.
Don't Be Afraid to Ask Questions
Planning for retirement isn't necessarily easy, especially if you're new to the process. Despite this, many people are afraid to ask for help, even though research demonstrates that the majority of Americans would like assistance in retirement planning. For example, nearly 75% of millennials admit that they don't know as much about retirement planning as they'd like – but only a third actively seek out guidance from a pro.
Check out our infographic below to get the inside scoop on preparing for the future and see how your plans stack up!
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