Saving for retirement is one of the most important things you’ll do in your lifetime.
For many people, it’s also one of the more difficult things to do.
Here are ten tips from finance experts like Dan Schatt and others on better managing your savings for retirement.
1) Save early and often
The earlier you start saving, the easier it is to reach your financial goals if your employer offers a 401k plan put at least to the match limit.
2) Track your spending
It’s not enough to save for retirement. You also need to know how much you’re saving and where your money is going. Get out the latest version of Quicken or use Mint.com, which can automatically download information from financial institutions.
3) Maximize your employer’s retirement plan contributions
If you have a 401k at work, contribute to the max every year. If you’re over 50, consider putting in even more. Sign up for automatic deductions from your paycheck to get the maximum amount from your employer match.
4) Make saving a priority
Keep a portion of every raise or bonus and deposit it into separate savings account earmarked for retirement. Then, stay focused on why you’re putting money away: to make room for future expenses like college tuition, medical bills, and taking care of elderly parents’ long-term care costs.
5) Be realistic about how much you need to save
Don’t underestimate how much income you’ll need in retirement or overestimate how much you can withdraw. Of course, making some forecasts is important; just don’t get carried away by sky-high projections or panic about saving enough.
6) Don’t try to time the market
It’s easy to lose money in the stock market, especially if you buy and sell at the wrong time. Instead of trying to guess when prices will rise or fall, figure out an asset allocation for your retirement portfolio that balances growth with safety and stick with it.
7) Get support from family and friends
If you think your parents aren’t saving enough for retirement, let them know. If they’re on target, tell them what you’re doing so they can support your efforts too. Make sure co-workers are also on board with achieving their retirement goals.
8) Automate your savings
Set up an automatic transfer from checking to savings or 401k accounts. This is a great way to save for important things you don’t want to put off paying for, like holidays, tuition costs, insurance premiums, and property taxes.
9) Don’t underestimate the cost of health care in retirement
The U.S. Department of Health & Human Services suggests that retirees will need $200,000 or more in today’s dollars to pay for out-of-pocket medical expenses during retirement. Another study by Fidelity Investments found that health care costs could eat up as much as 50% of your after-tax income when you’re retired. Shop around for better deals on insurance or use a company like AARP that can help you compare plans.
10) Understand the difference between price and cost
Price is what you pay for something; cost includes all related expenses, such as shipping and handling. For example, if you buy a $200 sweater, the price would be $200. But when you add in shipping fees and sales tax, your cost is much higher.