To raise public awareness about the importance of saving for retirement, Congress has designated the third week of October as National Save for Retirement Week. What lessons can you learn from this event?
First of all, save early – and save often. Too many people put off saving for retirement until they are in their late 40s – and even their 50s. If you wait until you are in this age group, you can still do quite a bit to help build the resources you will need for retirement – but it will be more challenging than if you had begun saving and investing while you were in your 20s or early 30s. For one thing, if you delay saving for retirement, you may have to put away large sums of money each year to accumulate enough to support a comfortable retirement lifestyle. Plus, to achieve the growth you need, you might have to invest more aggressively than you'd like, which means taking on more risk. And even then, there are no guarantees of getting the returns you require.
On the other hand, if you start saving and investing when you are still in the early stages of your career, you can make smaller monthly contributions to your retirement accounts. And by putting time on your side, you'll be able to take advantage of compounding – the ability to earn money on your principal and your earnings.
Here's another lesson to be taken from National Save for Retirement Week: Maximize your opportunities to invest in the tax-advantaged retirement accounts available to you, such as an IRA and a 401(k) or similar employer-sponsored retirement plan. If you have a 401(k)-type plan at work, contribute as much as you can afford every year, and increase your contributions whenever your salary goes up. At a minimum, put in enough to earn your employer's matching contribution, if one is offered.
Apart from saving and investing early and contributing to your tax-advantaged retirement accounts, how else can you honor the spirit of National Save for Retirement Week? A key step you can take is to reduce the barriers to building your retirement savings. One such obstacle is debt. The larger your monthly debt payments, the less you will be able to invest each month. It's not easy, of course, to keep your debt under control, but do the best you can.
One other barrier to accumulating retirement resources is the occasional large expense resulting from a major car repair, sizable medical bills or other things of that nature. If you constantly have to dip into your long-term investments to meet these costs, you'll slow your progress toward your retirement goals. To help prevent this from happening, try to build an emergency fund big enough to cover three to six months' worth of living expenses. Since you'll need instant access to this money, you'll want to keep it in a liquid, low-risk account.
So, there you have them: some suggestions on taking the lessons of National Save for Retirement Week to heart. By following these steps, you can go a long way toward turning your retirement dreams into reality.
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By Joan Casanova, Bonnie Plants,
Photographs courtesy of Bonnie Plants, Inc.
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