Retirement funds are perhaps the last thing on anyone’s mind when they are in their 20s. This could be why in their study on household finances, the Federal Reserve found that 26% of non-retired Americans have no form of retirement savings whatsoever, with 30% being over the age of 45. However, regardless of what age you are in life, you can still start your retirement funds — it just takes a little patience and dedication. On that note, we’ve outlined a few ways you can start building your retirement fund.
Before Anything, Prioritize Emergency Funds
We know this is an article about retirement — but as you grow older, you will become more prone to health problems, and dipping into your retirement funds is not the solution. Setting up an emergency fund first is more important, as Marcus points out that it can be a powerful safety net that can offer you a little peace of mind when you need it most, whether it’s for a health emergency or your car breaking down. Start by setting a goal and saving small amounts each month where possible — even $25 is better than nothing. You can do this in tandem with saving for your retirement funds, but make sure you prioritize reaching the goals of your emergency fund first.
Set a Goal for Your Retirement
Having an idea of how much you want your retirement fund to be will help put things into perspective for you. There is no one-size-fits-all number, however, as everyone has their own goals and specific lifestyle habits. You can start by figuring out when exactly you want to retire, which will determine how much you can save. Given that you’re planning a little later in life, it might also be prudent to retire a little later as well. If you’ve already determined when you want to retire, calculate your monthly spending, get the annual cost, and multiply that by at least 10 years. For instance, if you expect to retire by 65 and spend at least $70,000 in expenses per year, then you should have at least $700,000 by the time you retire.
Set Up Sources of Passive Income
When you’re retired, you’re unlikely to have any other form of income aside from what you’ve saved — which is why making these sources now is vital. Money Crashers suggests some ways you can make extra income, such as renting out extra properties you may have, starting or investing in a small business, freelancing or consulting, investing in the stock markets, and even blogging. However, you decide to gain passive income, it’s best to start as soon as now. Not only is it great for your future, but it will also give you some extra cash-in-hand, and an additional cushion for emergencies.
Protect Your Assets
Planning for retirement isn’t just about making sure you have money for the future — it’s also about making sure that money is protected before retirement. In our article entitled ‘Five Ways to Protect Your Retirement Income’, we detailed how keeping an eye out for inflation is an important thing to do, as it can affect your buying power. Additionally, it’s important to avoid withdrawing from your retirement savings too much, which is the purpose of your emergency funds. You should also create a will so that in the event of an untimely death your assets will go to whomever you want them to go to.
What does your retirement plan look like so far?
Retirement planning late in life will require a lot of commitment and discipline — you may be used to living a certain kind of lifestyle, but thinking of the future should be your top priority. We hope our list of tips will help you jumpstart your plan, as no matter what age you are today, whether you’re 40, 50, or even 60, starting small and setting goals will be enough to help you live a financially stress-free life.