Are you ready for retirement? Whether your retirement is 40 years away or right around the corner, ensure you have a happy and financially healthy retirement by putting together your savings plan today.
Retirement planning doesn’t need to be hard, and you don’t need to save tens of thousands each year to retire comfortably. Setting aside a small amount each year can help you live the life you want when you retire. Start planning for your dream retirement right now.
Set Your Retirement Goal
When it comes to retirement, there are a lot of numbers thrown around regarding what your savings goal should be, but how much do you really need?
The first step is deciding what kind of lifestyle you want to lead during your retirement. If you plan on traveling the world, your retirement goal will be very different from that of someone who plans to downsize and live modestly. Estimate the amount that you plan to spend each year after you stop working to help you hone in on your ideal retirement savings.
For those looking to maintain their current lifestyle, many retirement experts believe that you should plan on requiring an annual budget that is equal to approximately 80 percent of your pre-retirement income.1 For example, if you are making $60,000 a year when you retire, you would need $48,000 in retirement income each year to maintain your current standard of living. That means to live solely on your savings for 25 years after retiring, you would need to have $1.2 million set aside in your retirement account.
Luckily, part of your retirement income will come from your Social Security benefits. Using an online calculator, like this free one from the Consumer Financial Protection Bureau, can help you calculate how much you can expect in benefits annually. Additional income sources such as rental properties and pensions can also greatly influence how you set your savings goals.
Begin Saving Today
It is never too early or too late to begin your retirement savings. Starting today can allow you to take advantage of compound interest to help your money grow. Compound interest builds your retirement savings by earning interest on what you have deposited, as well as the previous interest you have already earned on that money.
Suppose you plan to retire in 30 years. If you put $1,000 away today in an investment account that features an 8-percent return with annual compounded interest, that $1,000 investment will grow to $10,062.66. Now imagine if you continued to add to that initial deposit throughout your career.
The longer you wait to begin saving, the more you will have to set aside each year to reach your goals and the less you will benefit from compound interest.
Budget Your Savings
Similar to how you budget for your rent or mortgage payments, you should also set aside part of your budget for retirement savings. Start off by allocating 10 percent of your income to be transferred into your retirement account. Setting up an automatic transfer will ensure your retirement fund grows with minimal effort.
Get the Most from Your Money
When you are deciding on the right retirement account for you, be sure to watch out for accounts that impose monthly maintenance fees or charge you to invest or withdraw funds from the open market.
Your retirement account may also provide you with financial benefits today. There are several forms of retirement savings, such as a Traditional IRA, that offer tax incentives. By maximizing your retirement savings with a Traditional IRA, you may be able to increase your tax refund or decrease your tax liability.
If you intend to maintain a more extravagant lifestyle during your retirement, you may want to explore a more diverse range of savings options. For example, you might want to place some money that you have no intention of touching over time into a high-yield savings account, where it can accrue interest over time. You could place other funds that you may need to dip into from time to time into a money market savings account, which allows you the freedom to write a limited number of checks each month while still earning a high interest rate. Accounts such as these could supplement your retirement accounts, helping to ensure that, when the time comes, you will be able to retire to the lifestyle you desire.
Speak with a Bank of Internet USA customer service representative today to find the right retirement solution for you. Call us today at 1-877-541-2634 to start saving for your retirement.