It’s a question you may be scared to ask but need to: Are you saving enough to retire?
Don’t be overwhelmed with the information out there. Saving for retirement should ease anxieties, not produce more.
To help, GoGirl Finance and bill and account management service Manilla.com have teamed up to provide this how-to guide.
The General Rule
The average person retires for about 25 years. That means you should have at least eight times your ending salary saved by the time you are ready to stop working.
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You want to balance having a comfortable life with the potential to pay for emergencies. Having a solid stockpile will give you an extra cushion in the case of health problems or a recession.
But When Should I Start?
Saving money from your pay check every month towards retirement likely isn’t on your radar after graduating from college, but new data shows that’s the best time to start saving.
Twenty-somethings who started saving early on had more on average than those who started saving in their thirties, due to snowballing interest earned on their savings, according to JP Morgan Chase’s 2014 Guide to Retirement.
That research showed that even if someone invests $5,000 per year for 10 years between ages 25 to 35, they will have saved more by the time they retire than someone who started at age 35 and invested $5,000 a year for 30 years.
An investment that large will be hard as you are just starting off — and making less than what you would during your 30s — but with time that dedication would pay off.
What If I Need More Time?
Hitting the age where your friends are retiring? If you don’t have enough saved yet, it’s OK to delay retirement.
If you continue to work for a few more years — even just one or two — you can save thousands of extra dollars. You could also continue working part-time as a way to keep money flowing into your bank account.
Many people who go this route restrict that part-time salary into a separate bank account designated for future retirement spending. The extra savings will cut your anxiety and help prepare you for the unexpected.
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What Are The Best Tips Out There?
There’s no perfect formula, but your best bet is making sure your funds are keeping up with inflation. If not, they won’t be worth as much as when you put the funds away.
Holding retirement funds in safe accounts like IRAs and 401(k)s are common practices nationwide. You can also invest funds in the stock market or other assets, but those shift based on the economy so a stomach for risk is required.