6 Money Moves To Make Now To Avoid Retirement Regrets
Written by
John Csiszar
Edited by
Amber Barkley
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
There’s no such thing as having “too much money” in your retirement account, particularly with the rising cost of living, the potential for large medical bills in retirement and even the uncertainty of your own longevity. So it can pay big dividends if you take active steps to prepare for your retirement while you’re still working.
With the proper plan, you can minimize the chance of financial regrets and hopefully end up with enough money to fuel the retirement of your dreams. Here are six money moves you should make now to position yourself for a well-funded retirement.
Max Out Your Savings
One of the most obvious steps you can take to boost your retirement nest egg is to save as much as possible. While you should always save as much as you can, most experts suggest saving at least 10% to 15% of your income for retirement.
If you’re just starting out in the workforce, you might only be able to save a few hundred dollars per month, but as you start earning more, that amount should increase.
Take Advantage of Employer Benefits
When it comes to saving for retirement, your employer can be your best friend. Thanks to the matching provisions that most 401(k) plans offer, your retirement account can be boosted with essentially free money.
For example, a common employer match is 50% to 100% of the first 5% of employee contributions. This means that if you earn $50,000 per year and sock away $2,500 per year, your employer may kick in between $1,250 and $2,500 on your behalf.
One of your main priorities in saving for retirement should be contributing at least enough to your 401(k) plan to secure your maximum employer match.
Cut Your Expenses
Sometimes, it can be difficult to work more hours, take on another job or boost your current salary. In that case, the only way to save more money for retirement is to cut your expenses.
However, this can also be an easy way to find additional savings. Most household budgets have a little fat in them, from unneeded subscriptions to excessive dining or entertainment expenses. If you can cut a few hundred dollars from your monthly spending, it’s the same effect as if you were earning more from your job — as long as you divert that money to your retirement account.
Invest Wisely
Saving money is an important first step, but investing your money wisely is critical to retirement success. The difference between earning 4% and 8%, for example, could literally translate into tens of thousands or even hundreds of thousands of extra dollars for retirement.
You’ll have to balance your risk tolerance with your investment objectives, but you should always strive for the highest return you can comfortably earn.
Start Early To Leverage Compound Interest
The earlier you can start your retirement savings program, the easier you’ll be able to build up a sizable nest egg. This is because compound interest needs a significant amount of time to work its magic.
A $50,000 retirement account earning 10% a year will only grow to $135,352 over 10 years, assuming no additional contributions. But over a 30-year period, that same $50,000 will grow to just under $1 million.
Looked at another way, if you want to build a $1 million nest egg by age 65, you’ll need to sock away $754 per month if you wait to begin until age 40, assuming a 10% average annual return. But if you start at age 20, you’ll only need to save a paltry $96 per month, thanks to the power of compound interest.
Create a Retirement Budget
While most planners look at retirement from the savings side, it’s good to double-check your work by looking at it from the expense side, as well. In other words, in addition to coming up with the number that you think you’ll need to save for a happy retirement, create a retirement budget with all of your anticipated expenses.
Then, you can use financial planning software to determine if your expected savings will be enough to cover your projected expenses over various retirement lengths, such as 10, 20, 30 or more years. This type of planning can help minimize the chance that you’ll have financial regrets in retirement.
More From GOBankingRates
