How To Save For Retirement – To have enough fund for your retirement, it is important that you learn how to save money for it.
Fact: The average American spends 20 years in retirement. Now, ask yourself: Do I have enough fund to live in comfort for 20 years after I have retired?
Financial security in retirement doesn’t just happen. You have to plan for it and most importantly you have to commit to your plan and make it happen.
How To Save For Retirement
Start Saving as Early as Possible
Time matters. The earlier you start to save, the more money you will get at retirement. This is due to two factors:
1. You save more because you are saving for a longer period of time.
2. You earn compound interest with the money you save with your bank. Compound interest means that the interest you earn grows exponentially.
To illustrate the power of compound interest, let’s compare two ways of saving. In the first way, you put $1,000 a year away under your mattress for 10 years and you save $10,000 in total. In the second way, you save the same amount of money in a bank which pays a compound interest of 10% for 10 years. Amazingly, your money will accrue to nearly $20,000 in 10 years. You get double the amount of money compared to the first method.
Pay Yourself First
How do you practice saving money regularly? Live by the creed: Pay Yourself First.
When we get our salary, what most people do is to pay their bills first: gas, electricity, rent or house installment etc. Whatever amount left over is for daily expenditure. By the end of the month, nothing is left for saving.
In order to ensure that we save some money, say $20 a month, we must include this amount in the category of bills to be paid. That is, we pay ourselves first by saving this amount in the bank before spending whatever sum is left over for our daily expenditure.
401K
Participate in your company’s 401K plan and contribute the maximum allowable. The great part of 401K plans is that the money you put in is taxed only when your 401K is cashed out. This means that your have more money working hard for you to help your investment grow since it is not reduced by being taxed away upfront.
Investments
Besides your savings and a 401K plan, you may consider investing in real estate as a reliable and safe method to increase your retirement fund. Real estate has shown good returns for investment throughout the decades. Make sure you own the property you live in and try to purchase a second home for investment purposes. This will boost your retirement fund and provide a comfortable nest-egg to live by.
How to save for retirement is an important matter all of us should consider seriously and plan for carefully. To many of us, retirement might seem like a long way off. But don’t let that illusion lull you into inaction. Start to save for retirement!