Ten suggestions for saving-money-for-retirement.

When should we start saving-money-for-retirement? The short easy answer is “now.” How and where to start is a little more involved but start today. Start a savings account either through your employer or bank but do it now. Even if you are living from paycheck to paycheck, you have to start saving today to build the saving habit.

No matter how young or old you are, start or continue a saving habit even after retirement.  Saving is tougher after retirement but is necessary just to stay ahead of inflation. It would also provide a way to help in funding unforeseen contingencies. 

Saving money for most of us starts with a small percentage of our income. Developing a saving habit with five or ten percent of your income is only the beginning step. Our goal of accumulating capital for retirement has to include an assessment of our current financial position; a review of our current expenses; an assessment of our current financial needs and levels of spending; an assessment of our current source(s) of income; and the development of other sources of income.

Your goal should be to spend less and save more. Avoid impulse spending. Don’t deprive yourself of things that you need but develop careful spending habits and learn to respect money. Increasing your income and spending less will make it possible to save more. Don’t fall prey to the manipulation of the credit card companies. A lifestyle of paying yesterday’s purchases over time is a trap difficult to escape.  Instead save for tomorrow’s needs today.

In establishing your saving-money-for-retirement goals, create a list with your spouse of anticipated future retirement needs and current health and financial realities. Remember that needs and wants are two different things. If you are near retirement age or have already retired, you have hopefully retired the debt on your home and paid off the automobile. A mortgage can be paid down more quickly by paying an additional sum each month to apply to the principal. Discuss your assessment with a knowledgeable fee for service financial consultant as early in the process as possible.

Consider the following in your saving-money-for-retirement plan

  • Start NOW. Today is the time to start. Simply because if we put it off until tomorrow, tomorrow usually never comes.
  • Open a dedicated savings account and establish automatic deposit. Instruct your financial institution to automatically place a specified amount from each check in that separate saving account.
  • As Ben Franklin said, “a dollar saved is a dollar earned.” Control spending with a thoughtfully prepared budget. Your budget can be a great tool to control current levels of spending. Your budget can be a useful tool but many people tend to spend the money allocated whether they need to or not. This is not a good practice that results in nothing left for saving at the end of the budget period.  Remember that the best strategy is to pay yourself first. Saving-money-for-retirement should not be budgeted as an expense but as a debit to your income.
  • If you are still employed and your employer offers a matching contribution to a 401(k), you should consider investing up to the limit of what your employer will match. Keep in mind that these contributions are tax deferred and are not forgiven. Taxes will have to be paid at the then current rate based on income in that year. The conventional wisdom is that you will be making less at retirement and will therefore be in a lower tax bracket. That may or may not be the case. A 401(k) or 403(B) could well be worth $300,000 to $500,000 at retirement. Disbursement of the entire amount on retirement or in the event of your death (if not passed to a spouse) could result in a huge tax liability. An employer matched, tax deferred plan is a good way to save-money-for-retirement but should not be the only egg in your basket.
  • Ask your financial consultant about a Roth IRA. The Roth IRA is a great saving-money-for-retirement method. The contribution to a Roth is made after tax, so you receive no deductions from current taxable income. But the good part is that when you are retired you can take distributions from the Roth tax free. This can be a significant advantage giving you another way to manage your tax liabilities and protecting your income.
  • Consider using some (not all) of your savings to pay down high-interest rate debts. This is smart because interest on your debt is likely much higher than the interest you are earning on your savings.  You are losing the interest war if you are only making the minimum payments on your debt balances. Paying off large chunks of your debt within a few months could save you a significant amount of money on interest payments alone. The money saved could be used to increase your savings. The goal of retiring debt free is achievable if we work at it. Also avoid new debt unless needed in an emergency.
  • Another way of saving-money-for-retirement is through the use of cash value permanent life insurance. While term life insurance serves a purpose, it becomes less important and more expensive as we age. Permanent life insurance should be included because it builds equity and has level cost. Also the life insurance coverage never ends as long as you continue paying the premium. Permanent life insurance is a great way to build a tax free nest egg for retirement. Discuss it with your financial or insurance consultant.
  • Developing multiple income streams would make saving-money-for-retirement and building a nest egg far easier. One of our goals should be to develop multiple streams of income that include some passive income that will continue without any additional effort on our part. It is easy to say but takes some effort to achieve. Sources of additional streams of income to consider and to discuss with your financial consultant are: A retirement job, retirement annuities, a retirement-business, a reverse mortgage, and/or a franchise opportunity.
  • Avoid risky investments including playing the stock market. Stay focused on your goal and don’t allow yourself to be distracted by tempting offers that seem too good to be true. Stick with what you know. Stock investing is complicated. If you include investing in the financial markets as a part of your savings plan get some good, trusted counsel and don’t invest more than you can afford to lose.
  • Be generous with the resources that the Lord has provided. Jesus tells us, “Give and it will be given to you. They will pour into your lap a good measure ­– pressed down, shaken together, and running over. For by your standard of measure it will be measured to you in return” (Luke 6:38). People who are generous with their money and who enjoy giving to others are usually not lacking themselves. In the Old Testament book of Malachi God tells us to test Him in this (Mal. 3:10).

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In the end it's not the years in your life that count but the life in your years. Abraham  Lincoln