Something many of us look forward to during our adult life is the ability to retire and enjoy our golden years.
If you haven’t started saving money yet, now is the time to start.
But it’s easier said than done if you aren’t sure where to begin.
Whether you begin saving through a work-related 401(k) or on your own with a retirement savings account, planning for the future is essential, and money is an obvious primary component.
Even if it starts as a small amount, starting a retirement fund can help you live comfortably once you’re ready to retire.
Saving for retirement should ideally begin while you are in your 20s. But for many of us, this can be quite difficult — or nearly impossible.
These four ways can help get you on the right path for your future and saving money right away, the right way:
1. Employer 401(k) Plan
If you’ve ever searched the internet for how to start a 401(k) or what one is for that matter, you’re not alone.
A 401(k) is an employer-sponsored pension account. Employee contributions come directly from their paycheck, prior to being taxed.
And sometimes, employers will match contributions up to a specified percentage. Employer contributions can be thought of as free money, in a sense.
If your employer contributes 3% each paycheck, and you contribute 5% of your own money, your 401(k) will earn 8% each pay period.
It could also be a good decision to increase your contributions each year, if your expenses allow it.
2. Plan Retirement Withdrawals
We dream about retiring one day, but typically not how we withdraw the money that’s been saved.
Tax-deferred accounts, like a 401(k) or traditional IRA can be the more efficient option when your income tax rate is lower.
But a tax-free account like a Roth IRA or Roth 401(k) is more beneficial during the times when your income rises if you need to take money from the account. You can do this without increasing your taxes.
3. Pay Off Debt
An unfortunate truth is that many of us are focusing on paying off our debt first, whether that is student loans or credit card debt, before we can think about saving for retirement.
Eliminating debt can go a long way when it comes to setting money aside.
Once the debt is paid off, or a smaller amount that is manageable, begin contributing additional money to your savings account or retirement plan.
4. Build an Emergency Fund
There is no set number when it comes to how much money you should have saved but covering three to six months’ worth of basic expenses would be ideal.
Reviewing how much is spent on monthly bills — like utilities, credit card bills, and rent, can help you determine how much you should have in your savings.
Whether you call it an emergency fund or nest egg, to help save for you future it would be ideal to have money saved that won’t impact your future by borrowing against your retirement fund.
Learn More About Retirement Planning & Saving
If you need help getting on the right path and investing in your future, the financial experts at Hudson River Community Credit Union can help.
We’ll be glad to answer any questions you might have regarding your future finances and how we can help you meet your goal.
Contact us today to get started with your retirement planning.