Saving up for your retirement should be on everybody’s priority list, as this will help you maintain a good quality of life when the time to stop working arrives. However, everyone’s situation might be different, and getting an early start may not be possible sometimes. If this is your case, you shouldn’t worry, as there are many different ways to catch up and start an effective savings plan for your retirement. Here are some useful tips that will help you get right on track and start saving for your retirement.
The very first step to take is to try and catch up with the amount of time on which you haven’t been able to save and take it from there. Assuming you are 40 years old, you are legally allowed to save $17,000 a year when using a 401(k) under a 7 percent return rate. This means that it would take around 30 to 35 years to end up with $1 million of savings, so keep this in mind and plan ahead.
Being aware of just how much we will need for retirement is an essential part of our savings plan. Some might say that $1 million is more than what they need, but it highly depends on the kind of life we want to have. According to experts, we should try to withdraw no more than 4 percent of our savings account every year. If we saved $1 million, this means we would be having on $40,000 a year, which is quite close to the average $57,000 Americans make a year.
Opening a Roth IRA account is an excellent way to add extra money every year to your savings account. This way, you’ll be able to maximize your contributions once you have finished maxing out your 401(k). One of the biggest advantages of having a Roth IRA account is that the contributions that go and grow there are not taxable. Besides, you can also withdraw money from there without taxes and you can even avoid having to pay the capital gains tax.
Getting adequate insurance coverage can help us reach our retirement goals quickly and easily. Suffering from an unfortunate incident can force us to dig into our savings account if we were not properly covered for such an incident. Therefore, we need to be careful and choose the best insurance coverage we can, always considering our actual insurance needs.
Last but not least, you should make sure you pay off any high-interest debt you might have in order to successfully save for your retirement. Whether it is a mortgage loan, credit cards, or any other debt, getting those payments out of the way will make it easier for you to contribute to your savings account. Consider making extra payments or possibly coming up with a payment arrangement that can minimize the amount of interests and fees that you would have to cover otherwise.