Today, we will give you some helpful tips for saving for retirement so you can enjoy life without the fear of running out of money.
1. The retirement plan
It’s never too late to start planning for your retirement. Many people wait until they are almost ready to retire to start planning for retirement but in reality you should start evaluating your numbers a long time (decades!) before.
Start your plan, by determining your age of retire, estimated expenses, estimated income to live off of, and how much you already have saved.
Setting up a budget is a great way to track how much you’re spending and find ways to save. Budgeting can help you determine your essential and nonessential expenses. Some or all nonessential spending can be reallocated into retirement savings.
2. Save, save and save even more
The sooner you start saving, the more your money can grow. The longer you wait to save, the more you will have to put aside. We suggest you should be saving 10-15% of your gross salary, including any contributions made by your employer. If you can’t put aside minimum 10%, put aside whatever you can to develop good saving habits.
3. Continue Investing
The next step is to remember to invest the money that you save, and just like with saving, the earlier you start investing, the more money you can grow.
4. Maximize social security
One of your biggest protections against running out of money is social security payments, which are designed to continue your whole life and are adjusted for inflation each year. Making a smart decision about when to sign up for benefits and when to claim them is very important. Every year that you delay taking social security, you get a substantial increase in the benefits that you take. You can technically claim social security benefits early, but your benefits will be permanently reduced if you fail to wait until the full retirement age.
But be aware that social security will likely only replace a substantial smaller part of your income, probably around 50% but you should target at least 80% of your pre-retirement income.
5. Withdraw wisely
You should be smart about making withdrawals. You can follow the 4% rule, which means that you withdraw 4% of your retirement savings each year adjusted for inflation. If you don’t want to run out of retirement funds, you need to control your withdrawal rate. Somewhere around a 4-5% withdrawal rate of your assets is the most you should take out.
Sven Franssen