A recent story run on NPR included the interesting fact that only 18% of Americans say they are “very confident” they will have enough money to retire comfortably. Are you in that desirable minority? If not, there are a couple of simple steps to take now to improve your odds of being happy then.
First of all, begin to set money aside from each paycheck for retirement. Whether the money goes in to an IRA or an employer’s plan (for example a 401K) doesn’t matter. What matters is getting in the habit of setting money aside every paycheck. I can still remember the advice of a co-worker from over 30 years ago, she would always put a portion of her pay aside for retirement. As she said, I pay myself first and then my creditors.
If you are fortunate enough to work for an employer who will contribute to your retirement, take full advantage of it. My employer will contribute $.50 for each $1 I put in to our 401K, up to 6% of my salary. That means even if I leave the money in a savings account I get an immediate 50% return on my investment. It would be a shame to miss out on that benefit! And as we know, the wonder of compound interest means a dollar saved today will be worth a lot more than a dollar saved 20 years from now. That means the benefit of starting as soon as possible, even if the regular contribution to your savings account is small, is immense.
I know, it is tough to set money aside. We all have to pay for – fill in the blank – student loans, car payments, and rent. The trick is to find a way to start small and build good habits. For instance, skip a meal out each week and set the money aside in your retirement account. The younger you are the greater the impact of compound interest on your savings. Go ahead, get started with your next paycheck.