by Susan Paige
The average American in their 60s only has $176,000 saved for their retirement. Unless you plan on living on much less than what you did while you were working, this can be disastrous.
While this number might sound like a big one if you’re used to living on $50,000 per year and you only have $176,000 saved and want to retire soon — it’s not going to happen.
Learning how to save money for retirement should be your main focus as you’re approaching your golden years. Continue reading this article to learn how much money to save for retirement and some of the best practices.
What You Must Know About How to Save Money for Retirement
When you think about your retirement, do you get cold chills or are you excited? Whatever your reaction is, you need to make sure that you have your money right or you aren’t going to have a very long-lived retirement.
Determine How Much Money You’ll Need for Retirement
Before you start saving blindly, you need to make sure that you know how much money you’ll need for retirement. You’re likely to underestimate how much money you’ll spend when you’re no longer working.
When you don’t have a job to keep you busy, you’ll likely want to go out and do more things. Many of the things that you want to see and do take money so you need to think about how your entertainment costs vs. just your hard expenses like groceries and your home.
It is better to over calculate than to undercalculate how much money you’re going to need.
How to Start Saving Even If You Think You’re Broke
If you think that you’re broke, you might not be saving at all for your retirement. The years will slip away and the amount of money that you could have socked away for retirement will no longer be as much as it could have been.
When you fully understand compound interest, you know that you need to start putting your money to work for you and get off the side of paying interest and on the side of collecting interest.
Roth IRA or Traditional IRA?
People have differing opinions on which IRA is the best and depending on how much money you make one may be a better choice than another. It is best to speak with a financial adviser that knows your exact situation so you can get the information that you need to make an informed decision.
Build an Emergency Fund
When you have unexpected emergencies that happen like a car breaking down or possibly a large appliance going out if you don’t have an emergency fund — credit cards.
Charging on credit cards takes out a serious chunk of change in interest and you want to make sure to avoid paying high interest as much as possible.
Having months of expenses in your savings account is an even better practice so you can stay safe if you lose your job. Living on the edge because you aren’t employed doesn’t do anything good for your finances or for your nerves.
Be on the Same Page as Your Partner
If you have a partner, you need to make sure that you’re both on the same page. Let’s say that you are all for being an extreme saver but your partner has a taste for expensive watches. That could cause a major problem with your plan and it could also cause problems in your relationship.
Hone in on Your Retirement Budget as You Get Closer
As you’re getting closer to retirement — near your 60s, you should look and see how your retirement plan is coming. You should also look at the years that are ahead of you.
How much money do you have saved? How are expenses looking right now?
If you aren’t sure how much money you have currently, you need to add everything together so you can figure out how close you are to your goal. If you aren’t close to it, you want to put a new plan in place so that you can achieve your goal in your desired timeframe.
When you look at the numbers, if you see that it isn’t possible to retire when you wanted to — what can you do to make it as short as possible? How long it is going to take realistically?
Don’t Forget Medical
If you’ve factored in all of your expenses, we hope that you didn’t forget medical. You shouldn’t plan to be at full health all throughout your life. You should keep in mind that there are often horrible things that we hope never happen that take place.
You should have a plan in place that will allow you to take care of your medical expenses even if they are very high. You may have insurance throughout your retirement but you need to look at your copays and other things that might play into how much money you need to put out for healthcare.
Want to Blast Your Debt?
Now that you know how to save money for retirement, you might be ready to start working away at your frightful pile of debt. While you might think that you should focus on paying off your debt before you work on your retirement, you now understand that isn’t the best way to do things.
Make sure to bookmark our blog for more great reads that will help you plan your finances and help you get out of debt.