Saving money for retirement doesn’t have to be a complicated process. While many day-to-day sacrifices are required in order to maximise savings, the benefits of building a healthy retirement fund surely outweigh the small indulgences that are sacrificed in everyday life. One dollar saved today can turn into a hundred dollars for tomorrow.
1. TAKE ADVANTAGE OF EMPLOYER CONTRIBUTIONS
Depending on your location, an employer may be required to make a contribution to your retirement savings. If this is the case in your area, be sure to check with both government policies and your company to educate yourself on what you should expect. In some areas, employers aren’t required to contribute to your retirement, but will voluntarily match dollar per dollar. That is, if you contribute $6,000 to your retirement, they will contribute an additional $6,000 to your retirement within the same year.
In other areas, employers are required by law to contribute a portion of your salary – out of their pocket – to your retirement. For example, some areas require an employer to contribute up to 9% of your pre-tax income to your retirement. It may be beneficial to live or work in an area with such a rule, as it offers automatic retirement savings without additional effort on your behalf.
2. MAKING SMALL SACRIFICES FOR LONG-TERM GAIN
The final ten years prior to retirement are arguably the most crucial. Ramping up your savings by rerouting a rather generous portion of your income into a retirement fund or investment account is an aggressive, but often necessary financial choice. It is also a good idea to pay off the remaining balance on your mortgage in order to drastically slash your monthly expenses in retirement. Little else provides as much peace of mind as knowing that your home is paid that you’ll be safe in times of financial hardship.
If you haven’t saved very much for retirement, yet are soon approaching retirement age, it may be beneficial to seek additional part time employment and funnel the extra income into retirement savings. While this is an extreme measure, it is an effective method to drastically boost retirement savings within a short period of time.
3. SELLING ASSETS FOR A CASH WINDFALL AND SMART PROPERTY PURCHASING
Homeowners with substantial equity in their home may choose to sell large residences in favour of a smaller, more affordable property that can meet the needs of a single retiree or a retiring couple. Ideally, the proceeds of the sale will cover the full purchase of the smaller home, and the remaining funds will be transferred into retirement savings. However, trading in a large, expensive property in favour of a home with a more manageable mortgage can also be a smart move.
Business owners that aren’t ready to fully let go of their business can sell a majority share to an investor while remaining a silent partner. This option still allows for receiving monthly or quarterly profits from the business while remaining a vested partner.
Saving for retirement becomes far less of a chore when you are aware of the lifestyle you want and how much income it will take to maintain your desired way of life. Making use of the financial resources that are available to help you save for retirement, along with a firm mindset on pinching the dollars that can be squeezed can result in a sizable retirement savings. Planning and taking action are the two most important ingredients to success when saving for retirement.