We’re all eventually going to get older, so even though it might seem far off, saving for our retirement is a necessary evil.
Nobody likes the idea of putting away lots of money that they won’t see for possibly many years.
So what can you do to still have a sufficient amount saved for retirement, but save less money at the same time?
The Early Bird Gets The Worm
The sooner you start contributing money to your retirement savings the less you’ll need to save. There is the magic of compounding along with the increased value of stocks and other investments over time. Optimally, you should begin saving for retirement when you get your first real job.
The largest obstacle with starting to save for retirement so early, is that retirement is so far away. It can be hard to remain dedicated (or even start) when it feels like it will be forever until you retire. Over the long run though, you’ll have more money to spend enjoying life because you’ll need to save less money for retirement.
Be Aggressive, Be-Be Agressive
The more risk you take in your retirement portfolio, the higher the chances of larger returns. Larger returns would equal more money, thus less money you’ll have to contribute to your retirement.
Of course, this one could also backfire on you. The other side of aggressive investments also means that you’re risking your money. Things could take a turn for the worse and your money would disappear. Usually the younger you are, the more risk is suggested and it slowly turns more toward conservative investments the closer you get to retirement age.
Everybody’s comfort level for risk is different, so make sure you understand what you’re risking before jumping the gun.
Hello Free Money!
If your company offers a 401k match of any kind, get hustling. 401k matches are essentially free money into your retirement account. Many companies offer 100% matches on the first 5% you contribute. What this means is:
If your pre-tax income is $40,000 a year, you contribute 5% ($2,000 year) and your employer puts in 5% ($2,000) of free money into your retirement account. Your $2,000 has now instantly doubled to $4,000. It doesn’t get better than that.
If your pre-tax income is $80,000 a year, you contribute 5% ($4,000 year) and your employer puts in 5% ($4,000) of free money into your retirement account. Your $4,000 has now instantly doubled to $8,000.
If your pre-tax income is $120,000 a year, you contribute 5% ($6,000 year) and your employer puts in 5% ($6,000) of free money into your retirement account. Your $6,000 has now instantly doubled to $12,000.
Pretty awesome right. Plus over time, that money can grow into even more money…especially if you start early.
Are you using any of these to save less for retirement?
Do you have another tactic?
Getting in early is a must, even with such low interest rates the more you can compound the bigger your nest egg will be when you need it.
Glen @ Monster Piggy Bank recently posted..Spring Break and my Misspent Youth
I wish we would have started saving for retirement way earlier, but there’s nothing I can do about that now. At least we’ve been saving for the last 5 years.
Jen Perkins recently posted..Money & Goals: Weekly Update #2
Your first point is one that all too many people forget, myself included. It is possible to still build a nice portfolio if you wait, but it’s much more difficult.
John S @ Frugal Rules recently posted..Happy Six Months to Frugal Rules!
Yep, the longer you wait…the more difficult and expensive it will be.
Jen Perkins recently posted..Saving Money Isn’t Always Easy
If you want to have a stress-free life later on, you need to plan for your retirement carefully. Yes, starting as soon as you can really helps a lot. You need also to decide to save a percentage of your salary and not to save what’s left of it. Decide now to prioritize and thank ahead so that you’ll enjoy the fruits of your labor later on.
KC recently posted..Signs You May Be A Shopaholic And 6 Things You Can Do To Change It
It’s amazing how time works when it comes to investing. Starting early is the best thing you can do for yourself. Even though the goal is way down the road, you’ll be much better off if you ignore putting off saving and start ASAP.
Jon @ MoneySmartGuides recently posted..Financial Lessons Learned From The Bachelor
I wish I had started saving for my retirement sooner. I realize that now I have to step it up, and I definitely appreciate your article. Best advice I could give anyone… it’s never too early to start saving!
Definitely. I wish somebody would have made me understand the importance of this when I was younger.
Jen Perkins recently posted..Money & Goals: Weekly Update #3
Actually, I’ve applied none of these. I didn’t open my IRA until I was 27, I’m a conservative investor (low tolerance for risk), and I’ve never worked for a company that matched. Heck, this last one was the first to even offer a 401(k)!
Edward Antrobus recently posted..What Video Games Teach About Personal Finance
But 27 is still better than 35 or 40.
Jen Perkins recently posted..Saving Leftovers To Improve Your Finances
It’s amazing how little you need to put away if you start in your early 20’s. It’s so much harder to play catch up later.
Kim@Eyesonthedollar recently posted..Spring Money Making Tip: Beginner’s Guide to Selling Kid’s Clothes on Ebay-$500 Giveaway!
Another good strategy is to increase your contributions during recessions.
I made a lot of money that way!
Nick @ ayoungpro.com recently posted..Blog Roundup #4
That is an excellent idea, stocking up while things are going down. But, that’s only if you can afford do it in those times. Love the idea though.
Jen Perkins recently posted..Daily Transfer Graduation & Automating Finances
Well things are a little different on this side of the pond. Those lucky enough to be in a company pension scheme will get some sort of matching addition – well most do. And the government does add into your pot in some way – the pension contributions are before tax so if you top it up with after tax income, your pension is topped up by Her Maj.
But we don’t at TMP get hung up about not starting early anyway – the best investment when you are young is yourself. The time to invest is when you are in the autumn of your life, career built, kids flown, house paid for (in theory anyway). Then you can get the investment right – and at least you are more likely to be alive to enjoy it!
John@MoneyPrinciple recently posted..Principled Money Posts #37: Happy Mother’s Day edition
I’ve tried to do each of these. The one that’s really powerful, in my view, is starting early. Just going into Excel and running scenarios, one can see just how important it can be to start as early as possible.
Digital Personal Finance recently posted..5 Things to Watch Out For in Retirement Planning
Yeah, it’s pretty crazy.
Jen Perkins recently posted..401k Match = Free Money
I don’t think people realize how strong simply starting early and getting that full 401k match really is. It can shave years off your target age and put a lot more into your pocket than you would expect. I’m taking advantage of all of these techniques!
My Money Design recently posted..Wealth Creation Strategies That Are Within Your Reach
Great job!
Jen Perkins recently posted..Money & Goals: Weekly Update #2
Front loading is the key component here. You do not have to take big risks; just build a diversified portfolio of no-load mutual funds with small expense ratios with a lot of index funds. Sit back and watch it grow over time with additional periodic dollar cost averaging. Be patient and it will pay off. I once a young guy and can see it clearly now.