Saving for retirement is not even on our radar when we’re in our 20’s or 30’s. However, now is the exact time we should be thinking about it. Because when you start saving for retirement at a young age, you see the most benefits.
For example, let’s say I started investing at 25 years old and invested for 40 years contributing $500 a month. By the time I’m 65, my investments will be around $1.2 million. If I waited just 10 years until I’m 35 to start investing the same amount, I’d only have $584,000. So if you’re reading this and in your early twenties, you’re lucky!
Now you know that investing as early as possible is so important. Time is on your side. However, if you’re in your 40’s or 50’s, it’s okay. You’ll just have to be a bit more aggressive with your savings.
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Here are 10 tips for saving for retirement. You can do this!
1. Find your FI (financial independence) number
Your financial independence number, A.K.A. FI, is the number that determines retirement preparedness.
You can find this number by calculating your annual expenses and multiplying that number by 25.
For example, my FI number is $36,000 (annual expenses) x 25 (years) =$900,000.
How much money do you need for retirement?
2. Set retirement goals
Retirement goals are important because they keep you on track for retirement. For example, if you want to have $1 million by the time you’re 65, you’re going to have to invest a certain amount each year, depending on when you started investing.
Retirement goals may look like:
- Open a 401(k) account at work or open a Roth IRA through a brokerage like Vanguard
- Budget to invest 10% of your monthly take home income
- Set a financial independence (FI) number
I also recommend checking out this free investment growth retirement calculator tool from @personalfinanceclub.
When I put my numbers in the retirement calculator with my current savings, it says I’ll have $785,756 at 65 (retirement). That’s without me putting another dollar in my investments. However, I may want to retire earlier, which is why I’m being pretty aggressive with savings now.
3. Contribute to your 401(k) through work
If you have a 401(k) through work and they offer an employer match, you need to take advantage of this. This is free money!
An employer match is simple – when you put in money into your 401(k), your employer does, too, up to a certain amount. You can learn more about 401(k) employer matching here.
If you’re not sure how to get started, contact Human Resources and they will walk you through it and help you get signed up.
4. Contribute to a Roth IRA with Vangaurd
A Roth IRA is an individual retirement account that offers tax-free growth and tax-free withdrawals in retirement. I personally have a Roth IRA with Vanguard and it was so easy to set up.
You can open a Roth IRA with Vanguard easily. All you do is:
- Fill out basic information about yourself
- Move money directly from your bank to your new Vanguard IRA electronically.
- Name beneficiaries for your IRA. (You’ll be sent instructions once your IRA is open.)
For 2021, the Roth IRA contribution limit is $6,000. You can contribute $500 a month ($500 x 12 months) to hit the contribution limit. You obviously don’t need to contribute the full amount. Some people just do $50 a month or whatever amount they can.
I personally put my Roth IRA into a Target Date Fund. A Target Date Fund is amazing because they automatically rebalance risk and get more conservative as I get close to retirement. I chose the VFFVX (Vanguard Target Retirement Fund 2055) because 2055 is around the time I’ll be retiring.
You can also open a Roth IRA with Betterment, which I talk about below on #6. Betterment may be ideal for new investors who like a user-friendly experience. Vangaurd looks a little outdated in my opinion, but it does the job and has incredibly low fees.
5. Enroll in an investing for retirement course
One of the easiest ways to get the ball rolling on retirement is to actually know what you’re doing. I was so confused about investing up until I was 25 years old. Fortunately, I found an online course and it was one of the best investments I’ve ever made (and it helps that the course is so affordable!)
The How To Build Wealth by Investing in Index Funds course teaches you the fundamentals of investing.
You learn how to:
- Open an investment account
- How much to invest
- How to choose an index fund
The course also teaches you extra things, like:
- How to withdraw your money in retirement
- How to invest for children
- Taxes on investments and how it works
This course is so cool because the creator (Jeremy) actually takes you INTO his actual investment dashboard! You get an actual walk-through of buying stocks, index funds, how to take out money in retirement, etc.
You can read my full review of the course here. For a fraction the cost of a college credit, you get information that teaches you how to have a million (or millions!) in your investment account when you retire.
Below is a great example of someone earning $4,000 a month and living below their means. This example shows someone taking home $4,000 a month, spending $3,200 and investing $800 a month. This person will have approx. $2.1 million if they do this from the ages of 25-64.
If you’re new to investing, I recommend checking out Betterment. Betterment helps you create a retirement plan and gives you advice on how much you should save for retirement.
This is how Betterment works:
Step 1) Start Saving. Betterment gives advice on how much to save based on your future spending in retirement.
Step 2) Build your plan. Betterment will help you deduce how to save for your retirement. They customize a plan with auto-deposits and tax-smart features, putting your money to work.
Step 3) See your progress. Betterment has an easy to understand dashboard that shares your balance, investment risk, if you’re on track to retire comfortably, and a lot of other fun details.
Betterment is a fiduciary (which is very important!) meaning they are always acting in your best interest. They also do NOT require a minimum initial investment. This is ideal for people who don’t have a lot of money to get started.
7. Read blogs about investing
Blogs are incredible for learning about investing. There’s a wealth of knowledge out there and you need to take advantage of it.
Here are my favorite investing blogs:
Related investing articles:
8. Read books on investing
I’m a huge book nerd and read about 50 books a year. So when I first started my investing journey, I started learning about investing through reading.
I did a simple Google search and looked up best investing books. I seriously feel like I read almost every single book, but I have a couple of favorites listed below.
Favorite books on investing:
9. Never touch your retirement savings
One of the best things you could do for your retirement savings is this: nothing!
Humans are incredibly emotionally. When you mix emotion and investing, it’s a recipe for disaster. This is why you need to use a set it and forget it strategy – for the most part.
I only check my investments when I’m actively contributing money. Other than that, I’m not checking to see how much money I’m losing or gaining. This is because I don’t plan on taking money out for another 30 years, so I don’t need to actively see how my money is doing now. I have my money in target date index funds, so my investments rebalance themselves as I get older.
Again, if you’re lost on investing and everything I’m saying, I recommend this investing course.
10. Follow like-minded people on Instagram
Instagram is incredible for finding a community of people who have the same financial goals as you. There are so many inspiring women who came from nothing and are on track to have over $1 million at retirement.
Not to toot my own horn, but I post a ton of helpful financial content on Instagram. So follow me on Instagram!
I also recommend checking out the following people on IG:
One of the best ways to stay motivated to complete your financial goals is to always keep them front and center. When you follow financial goal-oriented people on Instagram, you’re constantly reminded of what’s possible in the world. I love seeing other women kill it in the financial world.
Bonus: Find ways to cut costs
Are you being intentional with your money? On Fitnancials, I don’t preach penny pinching, but I do preach intentional spending.
Here are my favorite ways to save money:
- Get cash back on groceries (even healthy foods) with Ibotta. Get $10 for signing up for Ibotta here. If you’re downloading Ibotta on your phone, the app will ask if you have a referral code. Use my referral code: lwyxxrb and you’ll get $10 for signing up.
- Move your money into a high-yield bank savings account. Your bank right now probably offers 0.03%. That’s nothing. CIT Bank currently offers up to 1.70%. You can move your money and emergency fund to a high-yield savings account to save even more money. Open a CIT Bank account here.
- Save money on meal planning and save time grocery shopping with $5 Meal Plan. You get your first 2 weeks free here.
- Lower your bills like your cell phone, internet, cable, insurance, and more with Billshark. I used it myself and saved $290. All you do is upload a bill that you want to save money on here.
- Get cash back on online purchases (pretty much anywhere) with Ebates. You get $10 for signing up for Ebates here.
- Get the best coupon codes instantly when shopping online with Honey.
- Use a budget planner to keep track of your spending (this is the budget planner I use).
Sign up below for the free ultimate budget planner that includes printables like: debt tracker, income tracker, annual budget summary, savings challenges, financial goals, and debt thermometers!
My retirement plan
If you’re wondering what my retirement plan is, here it is.
It’s really this simple.
- 401(k): $812.50 per paycheck = $19,500 each year to Vanguard’s VTSAX.
- Roth IRA: $6,000 into VTSAX and target date retirement fund.
- Emergency fund: Currently at $5,000 with a goal of $15,000.
*At the moment, I am pausing investments because I’m saving for a down payment for a house! I wanted to share this to be as transparent as possible*.
Saving for retirement is a lot easier than you think. It’s also a lot more important to get started ASAP because compounding is key! The longer you save for retirement, the more time your money gets to work in your favor.
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What’s your retirement plan?
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