Retirement may not be for many decades, but it’s one stage of your life that you really need to start thinking about now. Yes, even if you’re only in your 20s and just started working a real job.
Why You Need to Know
According to a Gallup poll, retirement is Americans’ No. 1 financial worry. The reality is frightening for many Americans – they do not have enough money in their 401(k) to live comfortably. Many don’t have enough saved to pay for health care.
Since you’re just starting out, it’s an excellent time to start planning for retirement, so you don’t end up in the same predicament as millions of 55- to 64-year-old Americans are in right now. Knowing how much others have in their 401(k) and what you should have can help you stay on track.
Here is a list of the average 401k balance by age:
How do you compare to these averages?
If you’re excited because you have more than the average, don’t start imagining yourself celebrating retirement in the Caribbean just yet. Even Americans with more than $202,800 in their 401(k) find it difficult to survive on that amount.
So what does that mean for you as you’re trying to figure out how much you need to contribute to your retirement fund?
What You Need to Do for a Comfortable Retirement
It’s time to make a plan to save as much as possible. Don’t restrict yourself to a certain number because what could happen is you’ll reach that goal and then just waste the rest. Someday, you may look back and wish you hadn’t made frivolous financial decisions, but saved the money instead.
Right now, you may be thinking that the advice here is to never have fun with your money and live as frugally as possible. No, that’s not the intention. What you need to understand is that the amount in your retirement savings should be as large as possible, so you can live life comfortably someday. You don’t know what’s going to happen when it’s your turn to exit the workforce, so you need to prepare for it now.
Balancing Retirement Savings With Present-Day Spending
Most people don’t think about retirement savings until their 40s or even 50s. You’re ahead of the game because you’re reading this. Pat yourself on the back and then follow these tips to save as much as possible without living a pauper’s life.
- Diversify Your Retirement Savings Portfolio
Don’t rely on just your 401(k) because you never know if it will plummet. Diversify your retirement plans by starting IRAs and money market accounts. Look into Employee Stock Ownership Plans (ESOPs), Money Purchase Plans and Profit-Sharing Plans. There are so many retirement plans available, so take time to research each one of them to choose the ones that you believe are the best for you.
- Budget All of Your Money
Budgeting can be frustrating, but once you get into the habit of it, you’ll love it. Give yourself enough money for your basic needs such as your rent/mortgage, gas, utilities, food, etc. You can then allot yourself enough money for shopping, entertainment and other miscellaneous items. Take the rest of the money and put some towards an emergency fund and retirement. This way, you still get to spend some of your money in a fun way and save.
- Consider a Financial Advisor
Financial advisors aren’t just for the affluent. People like you could use one, too. A financial advisor will help you choose retirement plans and budget your money, so you’ll be able to save as much as possible while still living a lifestyle you enjoy.
Get Started Today for a Better Retirement
Don’t put it off any longer, no matter how much you have in your 401(k). Remember, you don’t know how much you’ll need someday. What you do know is that you don’t want to work until your last day on Earth, and you want to be able to relax and enjoy retirement. Find a financial advisor, work on a budget and research additional retirement savings plans. You’ll thank yourself someday as you’re sitting back relishing in the peace of mind you have about your finances.