Retirement is one of those life events that feels far away until it’s finally right on top of you, and because of this people are prone to procrastinating saving up for it.
But the longer you wait to get started, the more money you risk leaving on the table.
Low estimates by advisors recommend investing at least 10% of your monthly income towards retirement, which sounds daunting until you carefully consider the various places from which you can draw to reach this figure.
Even if you think you don’t have enough money to get started saving for retirement today, think again. There are some very easy ways you can tap into existing resources—and often even spending—and simply reallocate it towards retirement.
1. Set it and forget it—automate your savings
Instead of giving yourself the occasion to opt out of setting money aside for retirement, go ahead and automate contributions. You can often do this directly from your pay hub. It’s worth discussing with a financial advisor affiliated with the company handling any of your pay systems, or else who’s in charge of your retirement accounts.
Be sure to aim to get contributions taken care of pre-tax, unless you are working from within Roth accounts. With Roth accounts, which accept contributions post-taxes, you may even consider using an app that handles this automation step.
Often, long-term income projections drive people to choose whether they want an account that lets them defer tax payment or an account that makes them pay it upfront. If you anticipate being in a higher income bracket when you collect distributions in retirement, you may wish to pay upfront because that will legally give you a lower income tax rate.
2. Diversify your investments
Never put all of your eggs in one basket, the saying goes—and retirement savings is no exception. Don’t just stick to conservative options, and don’t neglect the power of diversification. Being tied to the outcome of one particular investment type does little for the long-term stability and security of your retirement funds.
Speak with a qualified financial advisor about the various options you have available, and be sure to look at different institutions. One consideration to keep in mind is the self-directed IRA, which gives you the widest range of asset types in which you can invest.
3. Go ahead: shift taxes to your 401(k) plan
No matter what tax bracket you are in, you are not taking home as much pay as you hope you are. A portion of it goes directly to the IRS. For every dollar you make, twelve cents or more go straight to the IRS.
But what if you take a portion of your pretax income and invest it directly into a retirement plan such as a 401(k)? Doing this reduces the contribution’s impact to your income and budgeting, while still encouraging you to start saving for retirement.
4. Evaluate what special programs you might be eligible for
Depending on the source of your income, there may be specialized retirement plans available for you to use and start putting money aside for retirement. These plans may have contribution limits that are appropriate for the income level you are receiving while also potentially allowing you to leverage tax incentives.