You Won’t Reach Retirement Without Saving for It
Many of us view our retirement years with expectant joy. We dream of having no bosses or clients to deal with and the idea of finally being able to do what we want in life. You might even speak with someone close to retirement and see their appetite whet as they envision what they will soon be doing. Vacations, volunteer work and relaxation are common retirement goals. Conversations with satisfied retirees reveal one stunning similarity – this period of R&R was reached through hard work and difficult choices. Hmmm…sounds like the frugal life, doesn’t it?
Our retirement years are dictated by the choices and actions we make now. Budgets are made and bills look overwhelming, yet we still need to include a line item for retirement. Unfortunately many of us are guilty of thinking we don’t have the funds to save and leave retirement savings in the rearview mirror.
A recent LIMRA survey found that 49% of Americans are saving nothing for retirement. While this is a startling statistic, it points out the seriousness of the situation. The situation is dire, yet it is not beyond repair. A few simple choices, the hallmark of living frugally, can get us on the road to saving for retirement.
Investing can seem daunting to many, especially if you lack the time or experience to do it yourself. Yet, if you are comfortable managing a self-directed IRA you can do so frugally as opposed to hiring someone to manage the funds for you. Even if you consider yourself a novice to investing, many of the larger online brokerages offer a wealth of free information about basic investment strategy. You can also take advantage of the fallout from competition in the online brokerage space as it has resulted in lower costs for many services, such as:
- No cost trading on a select group of ETF’s
- No-Load, low expense index mutual funds
- Free trades, or even cash promotions for opening a new account
- Brokerages, such as Motif Investing, that require very little to open an account
If you act wisely, then you can significantly lower your costs associated with retirement investing which will result in having more of your hard-earned funds working for you.
Free Money for Retirement…Yes, Please
A given for living frugally is being on the lookout for good deals, or even better, free money. The latter is hard to come by, so when you see it, grab it. The first place to look is your company-sponsored 401k. Many employers today will offer to match 50% of the first 6% that you save, capping it at 3% of your total income. This awesome benefit offers two tangible rewards:
- Free money
- Lowering your taxable burden
What could be better than receiving free money towards retirement and lowering your taxable liability? Additionally this free money is put to use towards your retirement savings which is our end goal. If you’re not comfortable making your own investment choices, many plans will offer Target Dated funds which can take the legwork of investing off of your plate and will allocate itself based off your age and will reallocate itself appropriately.
The simple answer is to stop waiting. If you can’t put away much for retirement in the beginning don’t allow that to keep you from saving altogether. Set a small goal that you can fit in to your budget and start with that. The act of saving for retirement, even in small amounts, will help you in the long run.