Whether you are just starting out in the workforce, nearing retirement or somewhere in between, you should always be putting away something for retirement. No matter how little your contribution might be, it’s better than nothing. Here are some excuses people have and how you should go about avoiding them.
First off is thinking you’re too young to start saving/worrying about retirement. You think retirement is so far away that you don’t need to start saving right away. The fact of the matter is that the younger you start saving, the more money you’ll amass throughout your life. If you were to start saving when you’re 25 as opposed to waiting until you’re 35, you’ll earn double if other factors are the same. If you have a 401k plan available at work, contribute as much as you can, especially if your employer offers a match. No plan at work, no problem! Contribute to an Individual Retirement Account (IRA). Cut back on frivolous saving now and you’ll thank yourself later.
The stay at home parent or unemployed spouse thinks he or she cannot contribute to a retirement plan since he or she does not have earned income. This is false! As long as your spouse earns an income, you can contribute to a spousal IRA. The max your spouse can contribute on your behalf is $5,500 (plus another $1,000 if you are at least age 50). If you were to contribute $5,500 for ten years, after another 20 years, you’ll have over $294,000 if you earn 7%.
A major excuse is having too much on your plate that oftentimes, retirement saving comes in last. Your basic tenet should be to pay yourself first. Forgo the expensive vacation, wait to save for your children’s college, etc. You should try to be debt-free before saving though. Once your debt is gone, contribute the max ($17,500 for 2013 plus $5,500 if you are 50+) until you are on track. Not sure if you are on track? Set a goal and strive to attain it.
Next, is the procrastinator who thinks it’s too late to start saving for retirement. It’s never too late to start saving for retirement. Do as much as you can to contribute up to the maximum allowed each year. If you’re at least 50 years old and can max out your 401k and IRA for 20 years, you’ll be up to $1 million in 20 years. You can also opt for a Roth IRA which allow you to save for longer, plus give you tax-free distributions during retirement. Consider rolling over if you have twenty or more years left of saving. Finally, delay receiving social security benefits for as long as possible.
Hopefully, you’re in this last boat. You’ve saved for retirement, so what else is there to do? Do you have a plan? Have you calculated your needs for retirement? How about a financial adviser? You need to stay involved with your retirement preparations. Make sure you’re diversified and that you’re not paying too much in fees. Check to make sure to see how your stocks are performing as well.