Saving is a critical part of retirement because it provides you with the funding you need to maintain your lifestyle, remain healthy, and enjoy your time. While the amount you need to save depends on a variety of factors, putting aside extra funds at the end of your career requires a plan, a savings goal, and a few changes to your normal routine.
Set a Goal
Before taking any measures to adjust your budget or evaluate areas where you can cut costs, set a clear goal. Look at your monthly expenses and determine how much money you need to manage your lifestyle comfortably during retirement. You want to save enough to manage your expenses, including rising health care costs, to last for as long as 30 or more years when you withdraw roughly 4 percent per year. For example, if you save roughly $1,000,000, then you may withdraw about $40,000 per year.
Downsize Your House
If you live in a large house and have a reasonable amount of equity, consider downsizing. By selling your current home and purchasing a smaller property with the funds from the sale, you have extra funds available to put into a retirement account or your savings account. It also allows you to avoid a mortgage, which may help reduce the amount of funds you need during retirement.
Budget Your Money
Setting up a budget helps you reduce impulsive spending by clarifying the amount you have available for the week or the month. It also helps you catch impulsive purchases so you have a clear idea of where you can cut costs. Sit down every week and take a look at your financial situation. Make a budget for each week and each month based on your saving goals. If you can cut back on specific areas, like a phone bill or a cable bill, then take steps to reduce the costs.
Put Money into Retirement Accounts
The idea of paying yourself first plays a key role in saving when you are nearing retirement. Maximize your retirement accounts and have the money removed from your paycheck before it reaches your personal bank account. For example, put the maximum amount into a 401(k) based on your age. Add money into an IRA account after you get paid. By maximizing your accounts, you automatically save more because you do not even see the funds in your personal bank accounts. To avoid complications with your personal expenses, make sure your paycheck will still keep up with your budget and normal expenses.
Shop with a Plan
Cut back on impulsive purchases and put the extra money into an investment or retirement account or even onto any remaining debts by shopping with a clear plan. Make a grocery list each week before you visit the store. Make a list of other necessary purchases, like soap, cleansers and clothing items, before you start shopping. The lists limit impulsive purchases and allow you to recognize an impulsive purchase when you look at your shopping cart at the store.
Saving at the end of your career differs from previous years because you want to maximize every opportunity and purchase. By clarifying your goals, setting a budget, and paying yourself first, you increase your savings rate and stay on schedule for your retirement goals.
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