Getting ready for retirement is not an easy process, in fact it usually takes a few decades for most people to be ready. Some people may start saving as soon as they begin working while others may wait to save until they have a more secure job and one that pays better.
The Wall Street Journal and LearnVest, a financial planning company, teamed up to take a look at retirement savings between and young and old. It seems that if you start saving earlier you can put less away each month rather than saving when you’re older. A person who saves $50 a month for retirement will have $50,000 before they’re 60 years old. If you start saving $100 a month at the age of 45 you won’t hit $50,000 until you’re about 70 years old. Now that you know that saving early can help, here are a few retirement savings do’s and don’ts.
- Do worry about your health. No matter what age you are, you need to be sure to get a yearly check-up. Staying healthy as you age can help with your healthcare costs in the future. If you’re in good health during your retirement years not only will you be able to enjoy retirement more, but your retirement savings will not have to be used for medical bills.
- Don’t underestimate what you need to save. There are many ways to estimate what you need to save to retire comfortably including using a retirement calculator. You also need to realize that this number could change over time. If you start saving in your 30s be sure to reevaluate this number in your 40s and 50s.
- Don’t be too optimistic. It’s easy to convince yourself you will save more money when you’re older, or that you can take a small “loan” replace the money as soon as you can which is called false optimism. You hope that things will get better, but one can never make that assumption. Instead of hoping for the best, plan for the worst.
- Do try to pay off your debt. You do not want to have to use your retirement savings for debt, so it is best to try to pay everything off before you reach retirement age. If you are reaching retirement age and find that you still have debt then you’ll need to start figuring out if you need to save more or how you can pay it off before you reach retirement age.
Figuring out how much you need to retire can be difficult as many factors can come into play. Using the following rules could help you start saving and bring you back to reality about how to prepare for retirement.