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Savings
Save Now, Retire Happy: 8 Ways to Future-Proof Your Finances
Most people dream of one day saving enough money to retire at an early enough age to truly enjoy it, but planning to save such a substantial amount can be overwhelming. Like any overwhelming task, it helps to break it down and analyze it in manageable steps. At Origin, we have plenty of experience with helping people achieve their retirement dreams. Here are some basic steps for putting yourself on the path to retirement success.
- Don’t wait – start saving early. One of the biggest mistakes you can make is putting off saving because you aren’t sure when to start planning for retirement. No matter what your first move is, it’s better than doing nothing. Whether it’s putting a small amount in a retirement savings account each month or asking about your company’s retirement benefits, saving big begins with baby steps.
- Learn the basics of long-term investing for retirees. Start by researching key tactics for diversifying your portfolio and how it can transform your net worth as you age. But first and foremost, consider how much time you have before you plan to retire and adjust your investment strategy accordingly. If you’re young and have many years ahead of you, your investments could safely carry more risk. If you’re close to your retirement date, low-risk investments are recommended for later-life financial planning to ensure you hold onto your hard-earned dollars.
- Start setting retirement goals. To determine your retirement savings goal, estimate what your annual living expenses will be. This could be more or less than what you spend currently. To cover the long haul, assume you’ll live to be at least 90, and, just to be safe, factor in possible future medical expenses. Just as you probably do now, you can adjust your estimated living expenses if you feel the retirement goal is too high. If you set a savings goal that’s reasonable, you’re much more likely to follow through with it rather than getting discouraged.
- Sign up for a 401(k) through your employer. Retirement plans through your job are great options because they’re typically auto-drafted from your paycheck, removing the temptation to skip deposits. Additionally, 401k employer matching means employers often match your deposit up to a certain amount. If so, make sure you’re enrolled and not passing up the opportunity for free money!
- Open an Individual Retirement Account (IRA). IRA accounts are essentially tax-advantaged retirement accounts where you can maintain investments that grow each year. If you have a choice between paying taxes or avoiding them by investing in an IRA, why not avoid the taxes? For tailored retirement advice, talk to a retirement financial advisor about what’s right for you.
- Track expenses and create a budget. The simplest way to save more money is to understand how you’re actually spending it. Keep a running total of your monthly expenses and incidental purchases, then determine where you can make cuts. You might think a $6 daily latte is no big deal, until you see you could be saving an extra $180 per month. Good money habits start with a thorough audit and careful planning.
- Reduce fixed costs. If the costs you have to pay every month (mortgage, car note, etc.) are relatively low, you’ll be in a much better position when unexpected expenses pop up. Remember that you can always adjust what you’re spending on other things, but if you lock yourself into high fixed costs, you’ll have less money available to save for retirement and unexpected emergencies.
- Hands off! Once your retirement money is saved, put it in an untouchable savings account. It’s tempting to rely on these savings for unexpected expenses, but avoid dipping into retirement savings if you can. Keep a separate fund for emergencies, and consider your retirement savings untouchable until you’ve actually retired. You’ll be thankful you did!
If you have any specific questions about how to make your retirement dreams reality, contact the Origin team. We’re always here to help.