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No matter what age you are or what point you’re at in your career, talk of retirement is seemingly everywhere. After all, setting aside money for later in life is a key part of financial planning, and it’s never too soon to start thinking about the future. But what happens if you don’t save for retirement? Read on to learn more about the consequences of not saving for retirement and how to start saving today.
The question “how much do I need to retire?” is one only you can answer, as there’s no one-size-fits-all solution. When saving for retirement, consider the age at which you plan to retire, your desired retirement lifestyle, and the sources of income available to you in your later years (e.g., Social Security, pension income, and investment income). The savings you’ll need will vary on these answers, but it’s generally advised to save 15-20% of your pre-tax income each year.
Not saving for retirement can put you in a precarious financial situation when it comes time to retire. With the rising cost of goods and services and possible increases in medical expenses as you age, not having saved enough will make it hard to maintain the same standard of living you might have been used to before retirement. This can lead to a significant decrease in quality of life, as well as needing to rely on Social Security or other government benefits.
Social Security is a government program that provides benefits to retirees, but it should not be relied on as your sole source of income. While the amount you receive can vary widely depending on your working and earning history, for most people, Social Security will only cover about 40% of what was earned during their peak income years. This means that in order to make up the rest, some form of individual retirement savings plan must be established.
The best way to start saving for retirement is by taking advantage of employer-funded 401(k) or similar plans. These allow you to save money pre-tax, so more dollars per paycheck are deposited into your account and less taken out when filing your taxes. Additionally, some employers will even match a portion of their employee’s contributions, providing an instant boost to their retirement savings.
If you don’t have access to a 401(k) or other employer-sponsored plan, opening an individual retirement account (IRA) is another great way to begin saving for retirement. IRAs allow investors to save both pre-tax and post-tax money, so you can mix and match the investment types that are best for your specific needs.
Additionally, you can look into stocks, bonds, and mutual funds to build your retirement savings. Each of these investments comes with risks and rewards, so it’s important to do the research before investing any money.
No matter what age you are or where you’re at in life, saving for retirement is a must if you want to have financial stability during your later years. By taking advantage of employer-funded plans or opening an IRA account, anyone can begin planning for retirement now and make sure that they’re comfortable when the time comes. So don’t wait – start planning and saving today!
