It’s concerning to learn that, on average, Americans have saved only about 78% of the amount they’ll need for their retirement, according to a 2023 report by Fidelity. Additionally, approximately 52% of people find it challenging to cover essential expenses after they retire.
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Retirement can bring both excitement and some apprehension, but with some thoughtful planning and saving, you can enhance your retirement experience and reduce any worries. Whether you’re on the cusp of retirement or still have a few years to go, it’s never too late to start building your retirement savings.
In this article, we will explore four essential tips on how you can grow your retirement savings and savor your golden years without financial stress.
Four Essential Tips For Building Retirement Savings
The four essential tips for building retirement savings include:
Budgeting is not something new. Most of us have been doing this since we received our first income. But budgeting wisely can help you build savings for the many upcoming years. No matter what your age is, it’s always smart to create a budget and analyze how much you can or should spend.
Here is how you can wisely create a budget and stick to it:
- Calculate your retirement needs. Make an estimate of how much money you will need per month to maintain your desired lifestyle after retirement.
- Make a list of your monthly essentials and their total cost. The list should include the expense of items you cannot compromise or cut off from your budget. For example, groceries, bills, fees, clothing, and other must-haves. Do not include any kind of fun activities in this list.
- The next step is to analyze how much money you are left with after buying the day-to-day essentials.
- From the leftover money, try saving at least 20-30% each month.
- It is obvious that your financial needs or situation may change over time. So, it is crucial to periodically review your budget and make adjustments as needed. However, don’t stop saving money no matter how small the amount is, even during hard times.
- Try increasing the percentage/amount of your savings if you get a bonus or a promotion.
2. Create Retirement Accounts
It doesn’t matter how much time you have left to retire or how much money you make. Creating retirement accounts can always work wonders. Saving even a small portion of your income and transferring it to your account can help you manage several expenses after you retire.
Retirement accounts are specialized financial accounts that help people save and invest for their retirement. There are some retirement accounts that employers offer to their employees, while others don’t involve employers and allow you to open and manage the accounts on your own.
Some of the most common types of retirement accounts include:
- Individual Retirement Accounts (IRAs): You can create and open an individual retirement account on your own as it doesn’t involve any organization or an employer.
- 401(K) Plan: The 401(K) plan is another retirement savings account commonly offered by employers. Many employers even offer 401(k) matches which means they will contribute some dollar or a certain percentage of money to a certain limit. Hence, you are getting free money in your retirement savings.
- Pension Plans: This is a less common retirement saving plan that is mostly available in public sector jobs and is offered by employers. In this plan, employers provide a specific monthly payment when you retire. The payment and plan are based on certain factors, like the number of years you spent serving the company, your position, salary, or others.
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3. Automate Your Savings
Automating your savings means setting and scheduling automatic money transfers from your bank to your retirement account. This way, you won’t have to take out that extra money from your pocket for the purpose of savings, allowing you to consistently save money without thinking about it.
4. Plan and Think of Other Income Sources
Relying on just one income source can be tough and challenging. Hence, another tip to build your retirement savings is to plan and think of other income sources that can help you throughout your retirement life.
There can be plenty of options. Working part-time, investing in rental properties, starting an online business, or blogging or creating YouTube content about your hobbies are all great ways to earn some extra income on the side, allowing you to save more for retirement.
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