Most people worry about having enough money in retirement.
But you can roll up a substantial nest egg, even if you don't make a lot of
money during your working years. The keys include learning to budget early in
life, sticking with it, saving aggressively during your peak earning years and
investing your money wisely and diversely. Here's a look at how experts
recommend saving for retirement at different ages:
Advice for
20-somethings
• Develop healthy financial habits. Learn how to budget and
how to spend less than you earn. These healthy habits will put you on the road
to saving for retirement later and help you financially throughout your life.
• Get out of credit card and/or college debt. Once you
have a little bit of free money, you should start investing in a 401(k) or
other retirement plans.
• Encourage parents to give their young-adult children
a leg up. The combination of tax-free investing and compound interest can have
a real impact on their savings, he says.
For 30-somethings
• Do a budget. Try to allocate 50% of their
income to living expenses; 30% to taxes and 20% to savings.
• Make sure you are contributing to your 401(k) or
other retirement plans by this age.
• Avoid taking on too much debt so you can save. Often
people in this age group are getting married, buying a house and having
children so it's tempting to take on too much debt.
• Have your retirement savings taken automatically from
your paycheck.
For 40-somethings
• Save aggressively. Many people in their 40s are
headed toward the peak period for earning and saving.
• See a financial planner. This professional can make
sure you are on track and tweak your allocation mix.
• Focus on smart investing. Make sure you own both
U.S. and international stocks in a diversified low-cost manner.
• Turbocharge your saving in other ways, including
getting Roth IRAs and mutual fund accounts.
For those who are 50
and older
• Save even more than 20% of your net income to
make up for the years when you weren't able to save enough.
• Start thinking about when you're going to take Social
Security
• Consider reducing your expenses. You might consider
downgrading your lifestyle, perhaps selling your house and moving to something
smaller or moving to a less expensive part of the country.
If all goes well and you've saved enough, you may be able to
retire comfortably in your 60s. Achieving full financial independence so you
don't have to work isn't easy, however, armed with enough knowledge and time,
it is possible.
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