Saving for retirement is not at the forefront of the typical twenty-something's mind. In fact, during this time, many young Americans live paycheck-to-paycheck or barely save enough to fund one year of retirement. And, many younger Americans think Social Security will fund most, if not all, of their retirement. But the future of Social Security is uncertain. The Social Security Administration reports that by the time Americans (age 26 to 35 retire) in 2046, benefits for all retirees will decrease by 26 percent, and every year thereafter. In short, if you're in your 20s and 30s, it's up to you to fund your retirement.
The Early Birds
If you want to start saving for retirement in your 20s or 30s here are five ways steps to help you get started, according to Money magazine:
- Create a retirement plan. Americans who have done a retirement calculation have nearly five times the savings of those who haven't, according to the American Savings Education Council. If you're concerned about how much to save, consult with a financial planner. This might help you decide on the retirement plan that's right for you.
- Make the most of your 401(k). If you have a job in the private sector that provides a 401(k), make sure you use it. Take full advantage of the tax benefits and employer plans that are key to building a successful retirement. And don't make the same mistake most Americans do, by not contributing to this plan.
- Take advantage of other savings plans. Think in terms of multiple retirement savings plans such as IRAs, TSPs, Roth IRAs, Simple IRAs, SEP-IRAs and Keoghs. The more you save now the bigger your nest egg will be.
- Don't be afraid to improvise. It's hard to save in your 20s, especially when you live paycheck-to-paycheck and have unexpected expenses that pop up. However, there are ways to pull yourself out of the "broke bucket." If you own your own home you can take out a reverse mortgage, relocate to an area with a lower cost of living, or delay your retirement. The key is to be resourceful.
- Monitor your progress. Once you formulate your retirement strategy, review the plan at least once a year and make adjustments as necessary.
If you're in your 40s and saving for retirement now, you have to a lot of ground to cover. Here are planning tips to prepare you for the road ahead, according to the American Institute of Certified Public Accountants:
1.) Save as much as possible. Contribute as much as feasibly possible to your 401(k) or other retirement savings vehicles. You should also supplement your retirement funds with mutual funds, savings accounts and other investments.2.) Cut expenses. If you cut back on dining out, buying expensive coffees or daily lunches, you could save enough money to invest in retirement.3.) Delay your retirement. You might have to wait to retire after age 65. This will give you more time to build your nest egg.4.) Rethink your retirement goals. Set realistic goals for retirement. Don't think that if you start saving for retirement at age 45 that you will spend your 60s in a beach house in Saint Tropez. Try to keep your goals within your budget, that is, unless you hit the lottery.
By investing in retirement early, you can set yourself up to retire comfortably. And, if you're getting a late start, it's OK, there is more than one way to plan for retirement. For more information or questions about retirement planning visit Military.com's Ask June section. June Walbert is a certified financial planner with USAA and addresses financial questions on a weekly basis.