It’s never too early to start thinking about retirement. The sooner you start saving, the better off you’ll be. But according to a recent study, nearly half of single Americans have nothing saved for retirement. If you’re in that camp, don’t worry—you’re not alone. Here are five reasons why you might not be prepared for retirement
You think you have time
One of the biggest mistakes people make is thinking they have more time to save than they do. The sooner you start saving, the better off you’ll be. If you wait until you’re 50 to start saving for retirement, you’ll need to save twice as much as someone who starts at 30. So if you want to retire comfortably, start saving now.
You don’t know how much to save
Another reason people don’t save for retirement because they don’t know how much they need to save. A good rule of thumb is to save 10-15% of your income each year. If you start early, you can save less each year and still reach your goal. However, you’ll need to save more each year to compensate for the lost time if you start late.
You have debt
Debt is one of the biggest obstacles to saving for retirement. If you have high-interest debt, like credit card debt, it can be impossible to keep anything. Try these methods for paying your debts:
- Snowball Method: start by paying off your smallest debts first. Once you’ve paid off your smallest debt, use that money to pay off your next smallest debt, and so on.
- Avalanche Method: First, start by paying off your debts with the highest interest rates. This will save you money in the long run because you’ll pay less interest.
These two methods can help you pay off your debt and save for retirement. It can also ensure that you won’t have debt years before your retirement.
You don’t make enough money
Another reason people don’t save for retirement because they don’t think they make enough money. But even if your income is low, there are still ways to save for retirement. For example, if your employer offers a 401(k) match, make sure to contribute enough to get the full match—that’s free money! And if your income is meager, consider opening a Roth IRA.
The most common type of IRA is the Roth IRA, named after economist Milton Roth. If you have earned income and do not make too much to owe federal income tax now, a Roth IRA may be preferable to a regular IRS-qualified retirement plan. A Roth IRA allows you to contribute up to $5,500 per year if your modified adjusted gross income (MAGI) falls between $122,000 and $137,000 as of January 1st, 2019 ($184,000 -$199,999). You can make contributions until the end of 2018 without paying taxes on those funds; however, any earnings are taxed at the end of the year. Your withdrawals in retirement will be tax-free under a Roth IRA.
You’re not sure where to invest
Many people don’t save for retirement because they don’t know where to invest their money. There are also plenty of options available. Here are some of the best options for you.
Index Funds: These are investments that track a specific index, like the S&P 500. Index funds are a good choice for retirement because they’re diversified and low-cost.
Target-Date Funds: These are another good option for retirement. With target-date funds, you choose a fund with a target date close to when you plan to retire. The fund will then invest your money in a mix of stocks and bonds that gets more conservative as you get closer to retirement.
Mutual Funds: Mutual funds are a good choice for retirement because they’re diversified and offer professional management.
Gold: Gold is a good choice for retirement because it’s a safe investment. Gold prices can go up and down, but over the long term, gold has always increased in value.
These are just a few of the many options available to you. Talk to a financial advisor to find out what’s best for you.
Planning For Retirement
Now that you know people’s problems when saving for retirement, you can start avoiding them. First, save as early as possible, and save 10%-15% of your annual income. Then, put that money into investments. Index funds are a safe choice, but gold can also help you grow your wealth. If you have debt, use the snowball or avalanche methods to pay it off. Lastly, don’t forget to account for inflation when planning your retirement. With a bit of planning, you can ensure a comfortable retirement.
If this is too much to handle, consider hiring a professional to help you. A retirement planning service can help you plan and save for retirement, because they can also help you invest your money to grow over time. They are a great option if you don’t want to watch your investments and money every time.
Retirement can be a challenging time for many people, but with proper planning, it doesn’t have to be. These tips can help you save for retirement and ensure a comfortable future.