Money Management for Retirement: Savings Plans That'll Fit Into Your Budget
It is often debated whether Social Security will be around in 20 to 30 years. But the reality is that you won't be able to survive solely on Social Security benefits. Organizing your priorities so that you give the same attention to your future retirement savings that you give to your current household and personal expenses is fundamental to securing that proverbial nest egg.
Choose the Right Job
When you're looking for a job or hoping to maximize your current employment benefits, look at what the company does to help you grow and protect your income. Consider several factors -- not just the job that pays the highest salary or hourly rate. The benefits offered by your employment might be the secret to saving for your retirement. For example, choosing between two jobs that both pay $30,000 a year seems like a toss-up.
However, if one job pays $30,000, plus benefits that include a 5 percent match on your retirement savings in the company's 401k, and the other job pays $30,000 without a 401k match, the better choice is the one that contributes to your nest egg. That additional $1,500 a year adds up, which actually brings your annual earnings up to $31,500.
10 Percent Savings Rule
Set a goal for your retirement savings and stick to it. "Start putting away 10 percent of your earnings. Right now. The sooner you begin saving money, making yourself and your future a priority, the more you will have invested when you look up 15 years later," says Gopaul. Avoid worrying about whether that 10 percent is before-tax income or after taxes, because if you're saving money through your employer's 401k plan, it's coming off the top and it's before taxes. You're still saving 10 percent if you set aside the money from your after-tax, or net, income. Gopaul says, "Just save and don't spend time worrying about how your tax liability is affected by when you put away the money vs. how often. Make regular contributions to your savings accounts. Unless you're in a very high tax bracket and you have capital gains and investments you need to shield, you don't need to agonize over whether your retirement savings comes out on the front end or the back end."
Flip Your Surplus
Disciplining yourself to get in the habit is essential for your retirement savings. And if you have a surplus that you're wondering whether to apply to bills or put away in your savings, do the what some consider the opposite of what sounds like the best way to use extra money. Gopaul says, "Life will continue to happen, and if you don't have any money in savings, you're going to be dealing with emergency after emergency. If you have a surplus, put most of it into your retirement savings and pay what you typically would for debt." The example Gopaul gives is someone who has an extra $200 a month. Do you put that toward your bills to get ahead or do you add it to your savings? "Put the larger portion toward your retirement savings. Say $150 goes into your long-term retirement savings account and the remaining $50 toward debt," suggests Gopaul. She says that while it's important to pay down your debt, positioning yourself for a stable retirement is critical.