As part of our ongoing series about savings, clever spending, and retirement planning, we have collaborated with the best financial experts from around the world.
How much do you currently have saved for retirement?
Most Americans rely on a paycheck to supplement their basic needs and have invested in individual retirement accounts because, for them, the future seems so distant. In the survey conducted by LifeHappens.org shows that 87 percent of American adults say they have not yet saved enough to retire and live comfortably.
How do you foresee your future in retirement? How will you save for the future when it’s so uncertain?
The best way to plan for a better future is to focus on starting today. In our ongoing commitment to aiding in defining and pursuing your financial goals, we have asked various experts for some golden advice on how to save for the future.
Read the full interview below:
CG: What is the best way to start saving for retirement?
1 Start Saving
Starting your savings plan gets so much easier if you know what you’re saving for. Develop a saving strategy and start the habit of spending less. You can only build wealth until you start saving better.
2. Clear off your debt
If you have a credit card, start with the highest interest rate, cut it, pay it off, go to the next card and start over. Instead of thinking about how to invest the savings that you now generate with your paycheck, focus on paying down your debt. Eliminate all your credit card debt and other high-interest debt and put the rest into the future. Next are consumer debt (cars, household appliances, etc.) or other high-interest debt, such as mortgage debt, credit card debt, and auto debt. You can work your way down by paying high rates debt and then paying off your mortgage.
3. Make sure you have a reserve
Emergency reserve funds, or cash reserves, are your first defense against an emergency expense such as the loss of job, debilitating injury, a major home renovation – not to add this major unpredicted worldwide Coronavirus crisis. The goal of having a reserve fund is securing yourself by creating a safety net without having to rely on high-interest loans. Start with saving $25 per month towards an emergency fund.
4. Start growing your retirement plan
By the time you have cleared off all your debts, take full advantage of your benefits as an employee. You can contribute up to maximum payments, then the habit of saving will be more likely ingrained in you. You can open a Roth IRA account at any online discount brokerage that doesn’t have account minimums. Pay your contributions, and get a commission-free, low-free target ETF, or balanced fund, that best fits your risk level. Pay your transactions periodically, that way your paycheck isn’t lost to commissions.
CG: Is it possible to retire early in today’s economy?
One could start with the traditional definition of retirement as the period between the age of 65 and 70. Your savings habits should go beyond what you are allowed to put into your pension account. Retirement savings should grow so that you have enough money when you reach the age of 50, 60, 70. In today’s economy, it is possible to retire early, but you can’t retire until you have enough money to sustain the lifestyle you want for the rest of your life. If you want to retire early, your plan must be robust enough to overcome unprecedented events, otherwise, your plan may derail. If your income – assets such as pension savings – is sufficient to cover your expenses and the necessary insurance, then you are ready to retire.
CG: Great advice! So how does exactly one attain “financial freedom”?
- Most people want to save more money, but without a concrete plan and good saving habits. Start by cultivating the habit of saving money, and all follows from here.
- Can you live a frugal life? if your lifestyle is lavish, it takes much more to sustain it than you think.
- How much money is generated by your savings and assets, and what are the huge levers? There is a huge rate of return on investments, but these are disregarded sometimes. The average IRA return is about 4.5%, and the nominal return is about 22% per year, according to the Federal Deposit Insurance Corporation.
How are you planning for your retirement age? To schedule a non-profit Debt Management Consultation, you may call our CreditGUARD Customer Support at 800-500-6489 toll-free or visit www.creditguard.org for more information.