It pays early to start early with retirement planning.
You need up to 80% of your annual income today to retire comfortably.
Here are five ways to help get your retirement plan off the ground.
Step 1: Determine How Much You Might Need to Retire Happily
It's time to crunch some numbers and review your expenses.
Fixed expenses: Mortgage or rent, life and health insurance, utilities and other necessary expenses
Flexible expenses: Groceries, clothing, transportation and more
Discretionary expenses: Travel, gym memberships and other nonessentials
Let's say the total equals $3,000/month. You'll likely need a minimum of this amount in retirement income to cover these expenses.
Multiply your total retirement income for the year by the anticipated length of your retirement to come up with a savings goal.
Step 2: Make Saving a Priority
After you have a savings goal, determine how much you should put aside each month. A good rule of thumb is to set aside about 10-15% of your income for retirement.
Step 3: Decide How You'll Prepare for Retirement
Here are some options:
401(k): Contribute a percentage of your income. Some employers even match a portion of your contributions.
Traditional or Roth IRA: Put pre-tax or after-tax dollars into a retirement account.
SEP IRA: Self-employed? Make tax-deductible contributions of up to 25 percent of your salary (for 2020).
SIMPLE IRA: Make tax-deductible contributions of up to $13,500 (for 2020).
Step 4: If You're 50 or Older, Consider Making Catch-Up Contributions
Behind on retirement savings? If you're 50 or older, making catch-up contributions can help you get closer to your goal.
For 2020, you can contribute an additional $1,000 to an IRA or an additional $6,500 to a 401(k).
Step 5: Put in the Work
Continue to save every month.
Landed a raise? Consider increasing your retirement contributions
Spend less on nonessentials
Avoid lifestyle inflation — earning more doesn't mean you should spend more
Our Retirement Calculator may be helpful to you in your retirement planning. Take a few minutes to answer a short series of questions to discover how much you may need to save.
Start developing the road map to your retirement destination today.