I think it’s safe to say we all want to retire someday, don’t we? I know I do and that means I need retirement savings. Someday around 60 years old I want to wake up without my alarm clock and spend my days drinking iced tea and doing yoga. I want to travel the world (by boat because I have a newfound fear of flying) and take afternoon naps in the warm sunshine. Ah yes retirement sounds lovely doesn’t it?
Your version of the perfect retirement life may be different, but the one thing we all have in common is that retirement takes planning and more importantly retirement savings. As a financial planner I wish I could tell you that at 65 years old you can magically quit your job and enjoy the life of a non-working citizen, but unfortunately I can’t do that. Retirement isn’t magic and if you want to stop working someday you’ll have to start saving now.
Here are four ways to make the most of your retirement savings:
Don’t look back
If you haven’t started saving for retirement yet that’s OK, but it stops today. If you want to retire someday you need a nice chunk of change and the sooner you start the more money you’ll have in retirement. This is thanks to a little thing we call compound interest.
When you invest money you earn interest on top of your previously earned interest plus your capital investment. Therefore the earlier you start contributing to your retirement savings the more money you’ll have.
Don’t count on extra money that’s left over after paying your monthly bills. If you do that you’ll never have money to save for retirement because there’s always money to be spent somewhere else. If you truly want to start building up your retirement savings then you need to contribute regularly by adding the contributions into your monthly budget and expenses.
Log into your online banking and set up automatic transfers (that you can comfortably afford) from your checking to your savings account. This ensures you’ll continue saving each and every month.
Add in lump sums
Taking your year-end bonus or tax refunding and spending it on home renovations or a nice vacation are wonderful ideas, but they don’t help grow your retirement savings. It’s a much better idea to put your windfall into your retirement account. Just remember that every dollar saved is a dollar spent towards a happier retirement.
Take advantage of your employer
Before putting your own hard earned money aside, check with your employer to see if they offer a retirement savings program. Very often employers will offer a 401(k) plan for employees where they contribute a percentage on your behalf in addition to your own personal contributions. It’s like getting free money for your retirement so if it’s available you definitely want to take advantage of it.