Ahhh, the golden years — the time that everyone looks forward to when the hectic daily grind is behind you, your mortgage is paid off and you can finally travel as you’ve always promised yourself…
This should be easy, because you’ve saved diligently throughout your career, right? Unfortunately, workers of all ages may find that this is a scenario they will never attain. Costs of living continue to increase, while it is relatively easy to reduce your retirement savings or reduce the percentage of your salary that’s being contributed. Don’t fall into the trap of thinking that you’re saving enough.
These tips will help jump start your savings plan at any age so you truly can retire comfortably, if not — retire rich.
Of course, comfort in retirement is going to rely heavily upon which generation you happen to fall into. This is what each cohort should keep in mind:
Millennials
Don’t wait to jump on the savings bandwagon!
It may seem as though you have all the time in the world before retirement so you can wait just a few years before you get started. However, that type of unrealistic expectation will have you struggling to work long past an age when you should be able to comfortably retire.
A significant percentage of millennials believe that only a few hundred thousand dollars will be enough for their retirement, but that is dangerous thinking. Instead, you should be planning to save upwards of $1 million in order to fund even a modest retirement plan after working for 30 years.
Experts recommend starting to put aside 10 percent of your salary as soon as you enter the workforce, but 20 percent is a better number if you can afford it.
40s
If you’re in your 40s, you better think twice before mocking those crazy millennials for thinking they only need a $200,000 nest egg on which to retire. More than 20 percent of workers in their 40s have amassed enough funds to comfortably retire by age 65.
What’s worse is that there is less time available to get saving, meaning you’ll need to funnel a higher percentage of your annual salary into your 401(k) or other retirement savings fund.
Analysts at T. Rowe Price note that if you start saving at age 45, it will take a massive investment of 29 percent of your monthly salary just to get to parity and hit that elusive $1 million retirement mark. Each year you wait adds a few more percentage points to your savings requirement so don’t delay!
50s
There’s no more time to waste: retirement is staring you right in the face unless you plan to work past age 70.
While this trend is becoming more popular, especially for contract workers, working past a certain age can be detrimental to your health and perhaps even take years off of your life. Studies from the Employee Benefit Research Institute show that only 22 percent of workers have saved in excess of a quarter million dollars. That sounds like a great deal of money, until you consider that you’ll likely have at least 20 years of retirement and will need a minimum of $40,000 per year — and that doesn’t take the cost of living increases into consideration.
Workers today have likely had multiple jobs by the age of 50, so now is a good time to consider pulling together any orphaned 401(k) plans from previous employers to be sure your investments are working hard for you every day.
60s
As you enter your 60s, it’s important to keep in mind is end-of-life costs, such as nursing homes or other long-term care needs. Fortunately, these should also be some of your best earning years.
College expenses and mortgages and (hopefully!) credit card costs are all behind you, so you can afford to dedicate a higher percentage of your salary to savings. Start as soon as possible and work with an investment advisor to be sure that you’re making the most of every opportunity to save.
This is also a great age to take advantage of catch-up contributions — an easy way to boost your 401(k) retirement fund and additional chances for adding funds to your IRA.
Regardless of your age, it’s truly never too late to create a savings plan that will allow you to retire rich. Be on the constant lookout for ways that you can economize now to enjoy a carefree future where travel and leisure are not completely out of the question.
Regards,
Ethan Warrick
Editor
Wealth Authority
