How to Start Saving for Retirement

By Shannon C , last updated June 25, 2011

Saving for retirement is a necessary task for every working adult, but in the delayed gratification that saving for retirement can provide, it is not necssarily an easy task to begin. When you first start planning for how to save for retirement, it can feel like attempting to climb a mountain with no training. However, with some basic foundational understanding of how retirement savings typically works, what your existing options may be that you are not yet taking full advantage of, and what your retirement goals are, it becomes much easier to save for retirement systematically and have that security to look forward to when you decide to retire. Learn from experts about how to start saving for retirement and enjoy the retirement lifestyle that is the fruit of your many years of working life.

Start Where You Are

The first rule of retirement savings is to start from where you are. Whether you have been systematically saving what you can, or have saved nothing at all, the time to start is now. Experts urge that the earlier you can start to save for retirement, and the more you can put away every month in the proper investment tools, the more secure you will be when your retirement years arrive.

Investigate Your Current Savings Options

If you work for yourself, you may need to set up your own retirement savings vehicles by taking the help of a financial professional or retirement planning service. But if you work for an employer, there is a great likelihood that you have access to a range of retirement planning options that can include tax-deferred savings plans, investment into mutual funds or company stocks, and even advisement from a professional investment or retirement planner. Taking full advantage of these services, including any employer-matching funds programs, can put you well on your way to saving for retirement without having to do too much independent research. Often company plans will also help you to estimate your financial needs at retirement, and plan for how much to invest into your savings account every month to be able to meet your financial needs at retirement.

Investigate Social Security and Pension Benefits

Another benefit you may have that you are not even aware of might come from an employer pension program or governmental social security benefits. Current statistics indicate that you will receive approximately 40 percent of what you earned in your working years from your social security benefits. Employers will set their own pension amounts and that you will need to investigate directly with your employer. However, these may be benefits you are already set up to receive in your retirement years that you just need to learn more about.

Design Your Retirement Savings Plan to Reflect Years to Retirement

Individuals who are new to their career or the work force and have many years of income-earning work life ahead of them will often adopt a more aggressive investment strategy than will those who are nearer to their retirement years. Typically, investment professionals will urge those in their twenties and thirties to consider slanting their retirement investment portfolio towards more agressive, yet riskier, investments such as stocks. Individuals who are approaching their retirement years, which are typically those individuals who are in their fifties and sixties, may conversely adopt a more conservative investment strategy weighted more heavily towards bonds and mutual funds. Individuals in their mid-work life years may adopt a balanced strategy that reflects both longer term and shorter term investment strategies to provide a steady rate of return for near- and late-retirement years.

Start an Individual Retirement Account (IRA)

An IRA allows an individual to contribute up to 5,000 dollars per year into a tax deferred account called an IRA or a Roth IRA. Individuals who are contributing and over the age of 50 are allowed to contribute at higher dollar values. These accounts defer taxation of retirement monies and allow for a very easy way to continue to save extra money towards your retirement.

Elect for Direct Deposit and Link Your Checking and Savings Accounts Together

One easy and nearly pain-free way to save money towards your retirement is to elect for direct deposit of your paycheck, and then simply link your checking and savings accounts together. In this way, you can instruct your banking institution to automatically deduct a portion of each month's paycheck to be drafted into savings before you even see the money. You will thus be saving for retirement in a way that makes it possible to safeguard your funds before you are tempted to spend them on something else.

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