Saving for a trip to Europe, a Caribbean vacation, or a cruise – all are a lot more fun than saving for retirement. But, the truth is that life can be pretty hard when you’re too old to work and you’re short of money. The sooner you start saving for your retirement, the better – even if it’s just a little bit. If you’ve never saved for retirement before and are 30 or under, you can try this approach to saving:
- For the first 6 months, try setting up an automated savings plan of 1% of your income. Your employer may be able to put this directly into your 401 (k) plan. 1% is such a small amount you likely won’t even notice it’s gone, but it will start to add up.
- For the next 6 months, try putting 5% of your income towards your retirement savings - That’s just 4% more than you were doing before, and remember, you hardly even noticed that 1% was missing.
- Now that you’re in the habit, take a leap – for the next year, put 10% of your income towards your retirement savings. Many financial planners recommend this amount long term. If your financial planner agrees, you’re already on track! If not, continue to make these steps until you are contributing enough for your retirement.
By making these small steps, you give yourself the chance to get used to saving. If you receive any money you weren’t expecting like a tax refund or lottery winnings, put 50% of the amount towards your retirement – you weren’t expecting that money anyway, and your retirement savings will grow that much faster because of it.
