It’s best to start saving for retirement as soon as you start working. Even if you’re only part-time, you should put away what you can from each paycheck. Every little bit helps and will add up over time.
If you weren’t able to start saving early like this, however, it’s not too late to get back on track and begin saving now. You may need to make some adjustments in your lifestyle today to accommodate for tomorrow, but there’s still time.
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Even if you are reaching 40 and you have not started saving for retirement, you still have about 20 years worth of time on your side. You may have to proactively save more money on a monthly basis than you would have if you had started saving in your early 20s, but you can still reach your retirement goals. As a bonus, when contributing to a tax-deferred retirement account, it doesn’t hurt as much to have to come up with the extra cash to save for retirement.
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In fact, if you save $1,000 a month for 20 years and assume a 5 percent return, this money will grow to approximately $400,000 by the time you are ready to retire, according to USAA. Assuming you are in a 25 percent tax bracket, putting $1,000 a month in a retirement savings plan may only require you to come up with $500 in additional money, if your employer matches contributions.
Be a Smart Spender
To come up with the extra cash you need to make contributions to your retirement fund, one big step you can take is to cut back on unnecessary spending. Cutting back on your regular expenses does not necessarily mean you need to do a total lifestyle makeover, but simply cut costs when and where you can.
Money-saving suggestions include:
- Cut back on cable expenses
- Bring lunch to work
- Borrow DVDs from the library instead of going to the movies or pay-per-view
- Eat dinner in instead of going out
USAA shares that cutting these costs alone could grow to $200,000 over time, making the same assumptions as those in the previous example.
While trimming small expenses can make an impact on your bottom line, cutting large expenses can make an even bigger dent in your savings goals. Take a look at your biggest bills, like your monthly mortgage payment, car payment and educational expenses, to see if there are ways, like refinancing or consolidating your loans, to come up with the money you need for your retirement goals.
Either in place of or in conjunction with cutting back on your spending, you should also consider ways that you can increase your income. It’s never too late to go back to school and earn your degree, which can land you a better job. If you already have your degree or the equivalent experience to land a better job, then start applying and interviewing to do so.
Even if you start a home business on the side or take on a part-time job for a short period of time, where you funnel all of the money you earn into the retirement savings account, it helps in making the contributions you need to reach your retirement goals.
Retirement may be sneaking up on you, but it’s never too late to start saving. Work out a plan now, so you’re prepared for tomorrow.
To find out if you can save money on your biggest expenses so you can start socking away more money for retirement, visit Quizzle.com. At Quizzle, you’ll learn how to lower your mortgage payment, get out of debt faster and create a more secure financial future.
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