No matter how old you are right now, your retirement years loom somewhere in your future. In order to live comfortably during your “Golden Years” you need to start planning as far in advance as possible. If you are still relatively young, retirement may seem so far away that planning for it hasn’t even occurred to you yet; however, it should. If you are closer to middle age, you have likely started to worry about your retirement years – and hopefully started saving for them as well. Regardless of where you are in your retirement savings plan, tips for saving money for retirement can always come in handy. With that in mind, some, or all, of the following tips may help you create the nest egg you need to live comfortably during your Golden Years.
- Start early. You have likely heard this from numerous well-meaning family members, friends, and advisers – and with good reason. The financial advantage to starting your retirement saving plan early is startling. Consider this: If you start at age 25 and put $3,000 a year in a tax-deferred retirement account for 10 years and then stop saving, your $30,000 investment will have grown to more than $338,000 (using a 7% interest rate) by the time you are ready to retire at age 65 even though you stopped saving at age 35. Conversely, if you start saving at age 35 and you save the same $3,000 per year for the next 30 years you would surely save more right? Wrong. Even though you would personally contribute $90,000 under this scenario, you would end up with just $303,000 — $35,000 less than if you had started younger but stopped after just ten years.
- Take advantage of employer sponsored retirement plans. Although the days of lifetime employment and guaranteed pension plans are a thing of the past, many employers do still offer retirement plans that match employee contributions. Not only will you get help from your employer with your retirement savings but your contributions are also usually pre-tax, meaning you also save money at tax time.
- Open an IRA. Whether your employer offers a retirement plan or not, opening a traditional or Roth IRA is another way to achieve double savings – both for your retirement and potentially on your taxes now or after retirement (depending on which type you open).
- Set up automatic deductions. If you are one of those people who has a hard time actually putting money in the cookie jar, try setting up automatic deductions. When the money comes out before you even see it, it is much easier to save. Set up deductions as payments once a month or every pay period.
- Delay Social Security. If you are able to work a few extra years and delay your Social Security benefits the advantage you gain can be well worth it. Age 62 is the earliest you can start accepting Social Security benefits; however, for every year between age 62 and age 70 that you continue to work and delay Social Security your monthly benefit will increase noticeably. For example, assume you are entitled to $24,000 a year in Social Security benefits if you start accepting benefits at “full retirement age” (age 66). If, instead, you start early, at age 62, your yearly benefit decreases by $6,000 to just $18,000 a year. Conversely, if you wait until age 70 to start your benefits, your yearly benefit amount increases by almost $8,000 a year to $31,680 a year.
- Pay down debt faster. While this is a good rule in general, it helps with retirement saving in more than one way. First, paying down debt faster frees up more liquid assets that can be put toward retirement savings. Second, you will pay less in interest, also freeing up additional money for the retirement fund. Finally, going into retirement debt free, or with less debt means you need less money to live comfortably during your retirement years.
- Consult with advisers regularly. Create a financial plan and an estate plan early in life and then make a point of reviewing those plans with your financial adviser and estate planning attorney on a regular basis.
For additional information, please join us for an upcoming FREE seminar. If you have additional questions or concerns regarding retirement planning, contact the experienced New Hampshire estate planning attorneys at DeBruyckere Law Offices by calling (603) 894-4141 or (978) 969-0331 to schedule an appointment.