You’re Already Behind on Your Retirement Savings? Here’s What Experts Have to Say
Retirement may seem far away when you’re not yet 30, but it’s never too early to start saving for your future.
According to Fidelity Investments, an expert retirement-plan provider says that for people looking to retire in their mid-60s, it is essential that they have the equivalent of their annual salary saved by the time they turn 30. So, putting this into perspective, if you earn $40,508 annually, which is, according to the 2020 data collected by the Bureau of Labor Statistics, the average annual earning of a 20- to 34-year old, you need to have $40,508 saved by the time you hit 30.
Hold on, don’t get intimidated just yet. We realize how daunting this information can be. So, we’ve gathered four tips to help you get started on your savings.
1. Automate your savings
The CEO and co-founder of Ellevest, Sallie Krawcheck, states that the best advice she can offer to future savers is to set up a direct deposit, which automates their savings. With this habit in check, you wouldn’t have to go through the strain of remembering to save every month. By scheduling direct deposits, a predetermined amount of money automatically gets transferred into your savings account from your checking account/paycheck.
This expert recommendation also prevents you from spending money that could be directed towards your retirement fund instead.
2. Set up a high-interest savings account
One more way to automate your savings is by opting for a high-yield savings account, which helps your money grow without any extra added work. Currently, the national interest in America is 0.05 for traditional savings accounts, so you want to aim for a platform that offers more than that. You might be thinking, haven’t interest rates on savings accounts fallen due to the pandemic? Yes, they have. But, even so, it would do more good than harm to let your money sit in an account that offers an interest rate higher than the national average.
3. Maintain your Cash Outflow
Once you’ve gathered enough cash to deposit into your high-interest savings account, you need to remember to keep the cash outflow to a minimum. The best way to do so is by creating a budget and accounting for every dollar you spend. You might even come across expenses that you can easily cut back on, such as unused memberships, subscriptions, streaming services, etc. Additionally, if you’re getting ready to ease out of remote working, consider your commute and food expenses as well.
4. Invest in your 401(k)
As soon as you land your first big-time job in your 20s, start allocating a percentage of it into your 401(k) retirement account. Of course, this amount varies on your salary and your cost of living, but no matter how small you might think it is, start contributing. Work on increasing your contributions annually as your career progresses. After a while, you’ll notice the money in your account start growing, all thanks to compound interest.
However, if your employer doesn’t offer benefits such as the 401(k)-sponsored plan, it is advised that you create an individual retirement account like Roth IRA, which essentially acts in the same manner.
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