When you’re young, you think life is forever. Later on, you realize life’s too short to be wasted, and that you need to save for the future. And should start doing it as early as possible.
Here are 7 signs that will tell you whether you are saving enough for retirement. Knowing them will hopefully let you change and/or fine-tune your habits. Let’s roll…
1. You don’t have specific goals
If there is one thing you can do to save enough money for retirement, it is to come up with a single figure you are gunning for. Think thoroughly about it to get to the amount you will be spending per every year of your retirement. That number will be the starting point that will (or at least should) guide all other moves you will be making to ensure for a smooth retirement.
2. You don’t know how much to save
Professionals suggest saving at least 10 percent of your gross salary. This, however, presumes you have started to save in your 20s. If that’s not the case, you will have to increase that number to anywhere between 15 and 35 percent. That won’t be easy for most people, but you gotta try. Set a realistic plan and follow through. Every now and then, consider adding additional money to your retirement account. Also, make sure to account for inflation.
3. You don’t match your employer’s contribution
You employer may be willing to match your 401K contributions up to a certain point, but if you’re not doing that, you won’t get that money. And that’s essentially free money that you will be using in your senior years. If you haven’t done so in the past, try to change that. You will thank us (and your employer) later.
4. You have borrowed from your 401K
Never a good idea, but it is understandable for some people who find themselves in desperate situations. There is a solution for this — more about it in a second — but for the time being you should restrain from borrowing any money from your retirement fund. Period. For those who have already did that, now’s the time to roll up the sleeves to catch up with your original savings goal.
5. You don’t have an emergency fund
This is probably the reason why you had to borrow from your 401K in the first place. As you determine your savings goal and start following through on that plan, you should then start putting some money in your emergency fund. As its name says, this money will be used in case of emergencies so that you don’t have to touch your savings. Related to this… (Also read: 7 Frequently Asked Questions About Emergency Funds)
6. You are only investing in a 401K
Diversification is the keyword here. It means putting your eggs in multiple baskets (rather than one). In addition to a 401K and emergency fund, consider setting up an investment account with some financial services company, and perhaps even a fund for your children’s education. This will ensure that you are ready no matter what life throws at you. Make sure to prioritize across these different accounts, though. Retirement savings come first!
7. You haven’t started saving yet
This is a problem for many Americans. And it’s a big one. No matter how old you are, now’s the time to start saving. Again, the earlier you start, the less you will need to save every month. But even if you’re “starting late,” do it. Time really does fly by and before you know it, you are old. By then, you should have enough money in your retirement account…
It’s not you — all of us are a bit nervous when thinking about retirement. But we have to “confront” it, and put something on the side for the days when we stop working.
If you’ve been making some of these mistakes in the past, now’s the time to fix them. Go through this list a few times, and prepare for the future. Also drop us a note if you have something else to add…