The days go by slowly, but the years go by fast … that’s how it is with saving for retirement. While it may seem like it doesn’t matter if you begin saving “tomorrow,” one day you may be surprised to discover that years have passed. Will you have saved what you need to live comfortably in retirement? No matter which season of your life you’re currently in, you can do it! Call them targets, milestones or goals, but aiming at various levels of savings by certain points in your life is the best way to stay on track with your retirement savings.
The earlier you can begin saving, the better off you’ll be in the long run. Whether you begin saving for retirement in your early ’20s or a little later, the first goal to reach lies about age 30. By that time, you should have saved an amount equal to your first year’s salary. You can achieve this milestone by systematically saving 10 percent of your salary in your employer’s 401(k) or other retirement savings plan. Additionally, during this time, begin eliminating any student debt or other long-term debt you may have.
To remain on track, when you are between the ages of 35 and 40 you should have retirement savings that total the equivalent of two times your beginning salary. It’s also an excellent idea at this point to consider ramping up your retirement savings contributions from 10 percent to 12-15 percent. Although the increase in saving doesn’t seem like much at the outset, those “little bits” will add up by the time you reach the next level of savings. If you find yourself behind and in need of catching up, consider saving additional retirement funds. Look for ways to either increase your income, reduce your expenses – or both – and save the difference.
As you enter your ’50s, retirement may seem closer than ever. But don’t let that slow you down in continuing to save. The time between ages 50 and 60 are a critical time for retirement savings. By your early ’50s, amassing somewhere between four to eight times your annual salary is a great place to be (depending on your income level, lifestyle choices, budget goals and the amount of time you have left to save). Furthermore, this is also a great time to stretch your retirement savings dollars by making catch-up contributions and working as long as possible. Retiring a year or two later than you’d like can make a significant difference in your retirement income. For example, each year worked beyond age 60 means eight percent more in Social Security benefits.
Using this timeline, you can begin paving the way to retirement with more savings than you may have thought possible. Wise counsel from experienced professionals can help you map out your retirement savings plan. An excellent resource is an experienced accountant like those at Donohoo Accounting Services. Schedule your retirement savings consultation with Donohoo by calling 513-528-3982 or email us today. And don’t forget to check us out on Facebook, Twitter or LinkedIn for our latest updates!
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