The average worker estimates that they will need about $ 1.7 million saved to retire comfortably, a study by Charles Schwab found. One-third of adults believe they will need between $ 1 million and $ 3 million to retire, and 1 in 10 believe retirement will cost more than $ 3 million.
In other words, most people work for them when it comes to saving for retirement. Even so, almost half of baby boomers have no savings, according to a report by the Pension Insurance Institute.
There is no silver bullet for retirement savings; Saving is hard work, no matter how much you earn or need to save. But there is one strategy that can make it a little easier.
Automating Your Savings: An Easy Way to Prepare for Retirement
To be able to save for retirement, you'll need to be consistent. Especially if you are trying to save more than $ 1
By automating your savings or by deducting a certain percentage of your salary every month or every salary to go to your retirement fund, you can continue to move. If you manually transfer money into your retirement account every month, it's easy to forget to save or just avoid saving because you prefer to spend the money elsewhere. But by automating your savings, you will be forced to save every month – whether you want to or not.
Automating your savings also helps you make a retirement budget. Instead of saving money left over at the end of the month, you can create a section in your budget specifically for retirement. Basically, if you treat retirement as another bill that you have to pay, it will be easier to save every month.
Additionally, if you contribute a certain percentage of your paychecks, you will be able to automatically increase your savings each time you receive a raise or bonus. Saving should not be a "set it and forget it" task; if you are able to increase your retirement fund contributions gradually over time, you will be able to save more with less effort.
How much of your income should you save for retirement?
Many financial experts recommend that you save between 10% and 15% of your retirement pay. This is just a rough guideline and the amount you have to save depends on your age, how much you have saved at the moment and how much you want to save until retirement age.
If you started saving at age 25 and want to retire at age 65, you should try to save between 10% and 17% of your salary, say researchers at the Stanford Center for Longevity. If you wait until the age of 35 to start saving, you will need to save about 15% to 20% of your income to retire at 65. And those who start saving at the age of 45 will need to hide about 25% to make 27% of their pay.
If you are lucky to have access to a 401 (k) with matching contributions from your employer, take full advantage of it. At the very least, try to save enough to win the full match – after all, it's essentially free money.
Even if you can't save much now, every small amount counts. And while increasing the percentage you save by just 1% or 2% a year may not sound like much, it can make a big difference over time. For example, you are currently earning $ 40,000 a year and saving 6% of your salary – or $ 2,400 a year. If you save just 1% more than your salary each year, that's an additional $ 400 a year, or just $ 33 a month. That may not sound like much, but at that rate, after five years, you'll save an extra $ 2,000 a year – bringing your total annual savings to $ 4,400. And if you need to raise or otherwise increase your income during this time, it will further increase your savings.
Retirement savings are challenging, especially as retirement becomes more expensive. Especially if you don't like managing your finances, it can be difficult to manually hand out money every month for the future. But by automating your savings, you can simplify your savings and stay on track to reach your financial goals.