Most of us start thinking seriously about our retirement only after we cross the age of 40. This is the time when we see our parents stepping into their retirement lives with the savings that they have so far accumulated. At this point, we get a clear idea of how our retirement life would be if we proceed to live our current lifestyle and this thought usually sets off the panic button among most of us.
Ideally, the best time to start saving for your retirement life is in your 20s. Though it may be a challenging task to start saving for your retirement after crossing the age of 40, it is never too late to kick start your retirement saving plans. You may have to save around 35% of your income if you want to be on par with a person who has saved 15% of his income from his 20s. However, careful planning of your future savings and investments along with some compensation in your present lifestyle can still help you save a fortune for the rainy day.
Figure Out Your Retirement Savings Requirement
Prepare a ballpark estimate of how much money you will need to lead a comfortable retirement life. Then figure out the amount that will be available to you from sources other than your savings such as your social security amount, pension from an employer, your 401 (K) plan etc. Plan a strategy for savings from your income to make up for the remaining retirement amount.
When a man retires and time is no longer a matter of urgent importance, his colleagues generally present him with a watch. ~R.C. Sherriff
Clear off Your Mortgages and Credit Card Debts
Owning a home can significantly reduce your retirement expenditure. Your mortgage loan will take away a considerable portion of your income and thus jeopardize your retirement plans. If you have huge credit card dues to be cleared, then you might end up paying the amount that you could have saved for your retirement needs to your credit card company. So, clear off your dues as early as possible to streamline your retirement plans.
Control Your Expenditure
The more you save, the better your retirement nest egg would be. Cut down unwanted expenditure such as regular lunch outings, movies, and unwanted shopping. Keep a track of your monthly budget and adjust it to suit your savings plan.
People tend to become too aggressive with their investments in the hope of catching up for the delay in starting with their retirement savings. However, if the investments are not done smartly and if you opt for a gamble, there is a high risk of possible loss of the principal amount invested, which could put your retirement plans in further trouble. At the same time, if you are careful with your investments in mutual funds, you could make a small fortune from your investment returns, which could be used to add up to your retirement lump sum.
Plan to Work on for a Few More Years
Delaying your retirement plan by a couple of years will significantly help to contribute towards your retirement savings. If you have no option but to quit the job at your retirement age, try to find options to start a new career, which allows you to earn during your retirement and while ensuring that the job does not take a toll on your health. This will help you delay drawing your retirement lump sum and your social security benefits, thus ensuring that you receive a higher income in later years to come.
Do not hesitate to seek the help of a finance professional if you are not sure of how to go about with your retirement plans. Start planning for your secured retirement life now. Though it may not be as early as you’d like it, it is not too late to begin either.