Back to Top

Q&A Articles

Tips on Saving for Retirement

Posted in: Money Management

For many of us, a “nest egg” may seem like a fantasy. We know we should save for retirement, but we’re currently consumed with mortgage payments, auto loans, child care, tuition and credit card debt, among many other expenses.

Instead of planning for retirement “later” – or hedging your bets on Social Security – making plans now to fund that nest egg will reduce many stresses and challenges down the road. The earlier you start saving, the better – yet also remember it’s never too late to start. These tips will help you kick off the process:retirement

Tackle High-Interest Debt – First things first, pay off any outstanding credit card debt. As your credit card balances decrease, your momentum and drive will likely increase. Check out our personal finance calculators   to determine how long it will take to pay off your credit cards.

Establish Investment Accounts – If your employer offers a 401(k) account, be sure to participate. You can contribute a percentage of each paycheck, before taxes, to retirement. For those who need a reminder to save regularly, this method is failsafe. The money is automatically deducted from your paycheck – it never reaches your hands, so you never have the opportunity to spend it.

  • Many employers offer a matching contribution to 401(k) plans. In other words, they’ll add money to your 401(k) too. In this case, opting out of your company’s 401(k) is like saying no to free money. In order to maximize this benefit, you should contribute the same percentage of the employer match, at a minimum.
  • If your employer doesn’t offer a 401(k) plan – or if you’re part of the growing self-employed workforce – open an Individual Retirement Account (IRA) or a Roth IRA. Seek the advice of a financial advisor to help you determine the right retirement account for your needs and goals.

Don’t Spend More Than You Make – Our grandparents had the right idea when they tucked their grocery money into one envelope and their gas money into another. They didn’t spend more than they had, and they saved up for big-ticket items like cars and kitchen appliances. These days, we’re bombarded with credit cards, leasing offers and 90-days-same-as-cash; “saving up” isn’t a necessity when you can simply charge your purchase. Heed the advice of past generations. Don’t incur more debt – save up for luxury items.

Consider Health Savings Accounts – If you are enrolled in a High Deductable Health Plan, consider a Health Savings Account (HSA) to ease healthcare costs as you enter retirement. HSAs allow you to make tax-free deposits into a savings account designated for health-related expenses. Just like a regular savings account, your contributions collect interest and grow over time. You can pay into an HSA now, and withdraw for medical costs in your older years. Just keep in mind that withdrawals for non-medical expenses will incur stiff penalties.

Diversify Your Nest Egg – As the catch-phrase goes, don’t put all of your eggs in one basket. This certainly applies to your nest egg! Take a look at U.S. Savings Bonds and treasuries for safe, guaranteed, inflation-linked investments. “Safe” investments become more crucial as you near retirement age.

  • Consider Downsizing – As you age, consider whether your house fits your needs. Have the kids moved out? Do you really need that extra room? You might want to downsize to a less expensive home in order to free up more cash for monthly expenses and build up your savings. This concept may apply to your car, vacations and shopping habits, too.
  • Pay off Your Mortgage – Imagine your golden years without this significant recurring expense. Make a goal to pay off your house by the time you retire. It’s an instant and substantial increase in disposable dollars. Consider refinancing your mortgage if it makes financial sense.
  • Determine Your Social Security Strategy – It’s true that Social Security is dwindling and your monthly check may be meager, but it’s still something. Once you’re eligible for Social Security, waive your benefits as long as possible in order to increase your payments down the line, especially if you’re still earning a regular paycheck.
  • Utilize Your Talents – Leverage your talents and hobbies to create a “fun” business that will provide an extra revenue stream in retirement.

Remember, it’s never too late to start saving for retirement. Socking away $25 a week – or even $25 a month – will significantly improve your quality of life in retirement while providing peace of mind in the present.