Today (July 26) is ?All or Nothing? Day. You don?t have to solve your financial problems in one fell swoop, but you can stop procrastinating on your retirement savings. Now is the time to go all in and get started.
According to the Employee Benefit Research Institute (EBRI), about 50% of workers say cost of living and day-to-day expenses keep them from contributing to a retirement plan ? or at least contributing more. I also hear similar excuses from people who tell me that they don?t make enough money to invest or to start saving for retirement.
However, waiting to save for retirement can be problematic down the road. There are various calculators online that indicate that starting to save just five years earlier can mean a difference of tens of thousands of dollars during retirement. Even if you don?t think you have much, the most important thing you can do is get started. Put the power of compound interest to work for you so that you can start building toward a secure retirement now. You can always increase your contributions later.
Here?s how to go ?all in? on your retirement, no matter where you?re at right now:
Figure Out What You Need for Retirement
The first step is figuring out what you likely need for a successful retirement. The EBRI indicates that many workers haven?t even determined their retirement needs. Your needs will depend on your long-term goals, and what you hope to do during retirement.
My own retirement isn?t likely to look a lot different from what I do now. That?s because I intend to continue writing for as long as possible. I might switch what I write about, or reduce the amount of client work that I do, but right now I get to travel and spend time with my loved ones, so I don?t see my retirement needs as much different, unless my health care costs skyrocket. (My HSA is my backstop against skyrocketing health care costs.)
Your retirement goals are likely to be different from mine. My parents have ?real? jobs and plan a slightly more traditional retirement. They want to travel a little more, and have time to do other things during the day other than work. They?ve spent years building a nest egg so that they can retire in the next five to seven years. But the fact of the matter is that they have analyzed their needs and built a plan for that, just like I have.
Start out by getting a solid idea of what you will need during your retirement years so that you have an idea of what to work toward. Once you have a basic idea of that number, you can begin to figure out how much you should set aside each month.
Start Saving for Retirement Today
One of the difficulties associated with saving for retirement is the disappointment that comes if you can?t set aside what you need right now. The good news is that the earlier you start, the less you need to set aside each month. But don?t despair if you can?t set aside as much as you would like.
When I first started saving for retirement, I could only put in $50 per month. That?s not enough to retire on. However, it got me in the habit of saving for retirement and making it a priority. Over time, as I reformed some of my spending habits and as I began earning more money, I found additional room to make contributions.
You can start your retirement savings by investing in a Discover IRA CD, or opening a brokerage account and using dollar cost averaging to automatically invest each month. However you do it, it makes sense to start as soon as possible, and to set aside as much money as you can. Later, you can get to the point where you can contribute more to your retirement savings. Right now, I max out my Roth IRA, and I am in the process of increasing my HSA contributions so that account is maxed out each year as well.
I didn?t get to this point by subscribing to an ?all or nothing? mindset, though. You don?t need to be able to max out your tax-advantaged retirement accounts for your efforts to be worthwhile. Start with what you can do now, and then make a plan to increase what you set aside over time.
The first step, though, is deciding to go ?all in? with your retirement. Make it a priority so that you don?t have to worry about outliving your money later.
Disclosure: This blog post was written as part of a sponsored program for Discover Financial Services. All views expressed are entirely my own, and were not influenced or directed by Discover Financial Services.