Saving for your retirement is essential. If you are planning to someday stop working altogether, then you have to figure out exactly what that age may be, and how much money you will need to save in order to survive without working.
Often, people who are in their 20’s and 30’s think that they’ll have a long time before they retire, and putting money away isn’t something they need to do just yet. They may have everyday expenses, or even a family to take care of, and can’t spare any extra money out of their pay to put towards retirement.
Having a 401k with your employer is a great way for you to start saving, even if it’s just a small percentage of your check each week. When you have a 401k the money that gets put away is tax-free. You can choose the percentage you would like them to take out of your pay each week and often, your employer will match that amount. Once you have chosen to save into your 401k you will then have to choose how to invest your money. Investing your money will allow it to grow over time and you’ll be able to save even more towards your retirement, without ever feeling the effects of the money taken out of your check each week.
Another option is to open a savings account. When you have a savings account, you are able to deposit any amount you would like. As the money grows, so does the interest on your account. The total amount of money you have in your savings account will determine the amount of interest you will receive on it. High yielding savings accounts are a great idea if you plan to save for a long time. Their interest rates are higher then a normal savings account which would greatly increase your savings over time.
It’s important that everyone should have a plan for retirement, no matter how young you are. You should sit down and make a list of your expenses and figure out how much you need to survive from month to month to be comfortable. You should also add some extra money to that because all expenses will increase over time. Think about the things that will make you happy, for instance, if you want to buy a new home in the future, a new car, perhaps take a few vacations, etc.
Once you have your plan in place then you should figure out exactly how much money you will need to put away each week to achieve that goal. Don’t figure in the amounts of interest you will gain, because those are never guaranteed. You should think about only the income you have at the moment and how much of it you can spare to put away. You should also be sure to put the money in a place where it isn’t easily accessible, as you may be tempted to dip into it before retirement. This can cause you to lose money as fees are always incurred whenever you withdraw, be it from a savings account, or a 401k.
Another option that a bank offers is a CD. This is where you take a lump sum of money and put it into an account without touching it over a period of time. This could be several months, or several years. During that time, you will gain interest on it.
There are many options to saving towards retirement, but only you can decide just how much you want to save, and just what type of a future you are saving for.