Financial literacy is knowing how much money you’ll need once you hit the retirement age. While the old age budget varies from one person to another, at 30, you should have saved at least your annual income. The savings should be at least ten times when you hit 67 years.
Are you prepared for retirement? A recent National Retirement Risk Index survey indicates that about 50% of working households will fail to maintain their lifestyle once they retire.
So, if you’re behind in saving for retirement or want to get started, this guide can help you stay on track. We’ll discuss a few tips you can implement to boost your saving habits and secure your old age.
Let’s get started.
Integrate Saving into Your Budget
The sooner you start saving, the better. Otherwise, you’ll find yourself underwater later in life. If you have a limited budget, you can still maximize your savings.
First, set up automatic contributions. You can use your employer’s direct deposit (401 (k)) or open a dedicated savings account (IRA) where the deductions are saved. Another option is to cut expenses and channel the extra cash into your savings account.
Consequently, you can start a side hustle to grow your savings. You can become a freelance writer, start a writing agency, or create a blog or website. You’ll be compensated as a freelancer and earn from your website through traffic and ads.
As a blog/website owner, you can specialize in a niche of your interest. If you choose gaming, you can write about game reviews, news, guides, and gambling tips for your audience. For example, a real money pokies casinos guide helps punters learn how to play online pokies and find the best pokie casinos in Australia.
Set a Retirement Savings Goal
How much is enough for your retirement? There’s no one-fits-all answer to this question, as individuals have different needs. Setting up a retirement savings goal can help you determine your retirement budget.
When writing down a savings goal, consider the lifestyle you want to lead, expenses, and potential medical and other emergency bills. Also, consider support from social security and pension plans. This way, you can set your retirement savings goals bar high.
So, how much should you save towards your retirement kit? A study by the Center for Retirement Research at Boston College indicates that 15% of your income should go towards savings. This is ideal if you start saving at 25 years and want to stop working at 62.
Protect Your Savings from Inflation
Inflation can lower your purchasing power, but there’s a way to retain your financial security. Investing in precious metals like gold and silver is among the top 5 ways to protect your retirement savings from inflation. Precious metals have historically proven to store and rise in value under inflation.
Indexed bonds are another viable option. For example, the value of the US Treasury inflation-protected securities (TIPS) and other bonds is raised to match the inflation index.
Alternatively, you can diversify your portfolio by investing in various items. You can invest in bonds, stocks, real estate, or physical commodities. Each item should represent a percentage of your portfolio, giving you more financial freedom.
Pay Off Debts and Increase Your Retirement Savings Rate
Most working households have a credit card balance in their 40s. Clearing off this debt before hitting your 50s improves your financial health. After paying off the debt, you can increase your retirement contribution.
Another way to increase your savings rate is to avoid the temptation to spend more when your earnings increase. Instead, deposit the paycheck difference into your savings account for any bonus or pay rise you get.
Alternatively, you can use the paycheck difference to start a business to generate more income. Consider saving some of the profits into your retirement account and use the remainder to expand your business.
Get a Long-term Health Insurance
Some unexpected medical costs can eat up your lifetime savings. According to Fidelity, the average medical bill in retirement for a couple in their mid-60s is $315,000. So, protecting your finances against medical uncertainty is an honorable thing.
The best way to handle the rising healthcare costs is to get a long-term health insurance cover. While such medical coverage comes at high annual premiums, it takes care of all your medical bills in old age. Long-term insurance also caters to nursing and assisted living, saving you a hefty amount of money that nursing homes charge annually.
Don’t Wait, Secure Your Old Age Today
One thing is sure—old age. The earlier you start saving for retirement, the higher the savings. You can begin by writing down retirement savings goals to determine how much you’ll need in your old age. Afterward, you can calculate how much you want to contribute to the retirement kit annually, considering your income and other expenses.
