The earlier you start saving, the better. But you already know that.
What if you didn’t start saving at 20-years-old? It’s not uncommon to drag your feet with retirement planning. In fact, it’s an issue for so many people. The problem is procrastination tends to feed itself. Because you didn’t start saving in your 20’s, you feel anxious when you think about saving in your 30’s, more years go by, and now you feel it’s just too late.
Don’t let that happen to you. No matter what age you’re at or what age you’d like to retire, start planning for it now. If you have a plan in place that you’d like to improve, do it today. Every year is an opportunity to build your future, no matter how late of a start you might have gotten.
So what can you do to plan for retirement? What are some retirement planning tips for those further along in their career? Find out now.
Your Retirement Planning Begins Now
This point deserves reiteration. Why? You’re not actually saving for your retirement, you’re investing in it. Investments take time, and every second counts. In the words of the CFPB, “Compound interest is when you earn interest on both the money you’ve saved and the interest you earn.” So if you invest $1,000 this year and it earns 5% interest, next year you’ll have $1,050 invested. So on and so forth. The difference of 10 years is groundbreaking. Someone who invests $10,000 at age 25 versus one who invests the same amount at age 35, will see nearly twice as much money in the end as the latecomer.
Save as Much as You Can
If you’re the 35-year-old in our example, don’t get discouraged. No matter what you invest or when you do it, you’ll be grateful for it in the end. But how much should you set aside? It depends on your circumstances. Most other resources you’ll find will tell you 15%, and that’s a fine starting point. But there’s more to it than that. How long from now are you planning on retiring? Are there opportunities for you to reasonably lower your expenses? Are you simultaneously saving for your child’s college fund? Is there an inheritance you can plan on?
Determine what 15% of your income means for you. Consider that your starting point and then take these other financial factors into consideration. Remember: saving money is a habit. Taking $600 out of your hard-earned paycheck and putting it out of sight is going to feel terrible the first time. There’s undoubtedly somewhere else you’d like to spend it. But then it just becomes a habit. You start to see the money grow, you forget that $600 per month used to even be available to you, and saving money becomes second nature.
Plan for Inflation
When determining how much you’re going to set aside, remember to plan for inflation. It’s going to happen, it’s happening as we speak. You might reason that 30+ years from now you won’t have a mortgage, likely any car payment, and so forth. But don’t forget how the price of food, gas, and all of the other necessities can and will change. Not taking inflation into consideration can result in a wildly different retirement than you expected.
Retirement Planning With a Professional
Retirement planning gets put off for a reason: it’s abundantly overwhelming. That’s why anyone who procrastinated did so in the first place. If you’re a self-employed individual, supporting a family, planning for your child’s college education, or any other number of factors, you have an even more complex retirement to plan. Working with a financial expert lifts the fog around retirement planning. Chris Haro and his team are experts at integrating your goals with your circumstances. Call today to set up a consultation.