Many Americans fear they’ll run out of money in retirement.
In fact, according to a survey by Allianz Life, approximately 64% of Americans are more concerned about running out of money than they are about passing away. A Northwestern Mutual survey found that 51% of Americans think they will outlive their savings.
However, as bad as things may seem, there’s still time if you’re thinking of retiring.
In fact, according to Dave Ramsey:
Create a budget that lists your income and your expenses.
This is crucial. Without a budget, many of us lose track of what’s coming in financially and what’s going out. In fact, when others have asked me for financial advice, my top question is, What are you spending on? Unfortunately, I’m often met with a deer-in-the-headlights stare and a response of “I don’t know.” Unfortunately, not knowing will destroy you financially.
Get out of debt.
Easier said than done, sure. But there is a way out.
According to Dave Ramsey, use the debt snowball method, where you pay off your debts in order from smallest to largest. In doing so, list out all of your debt, including student loans, car payments, mortgages, credit cards, etc.
Then, as noted by Ramsey Solutions, “Make minimum payments on all debts except the smallest—throwing as much money as you can at that one. Once that debt is gone, take its payment and apply it to the next smallest debt (while continuing to make minimum payments on your other debts).”
Then, repeat this process over and over again until you reduce your overall debt.
Set up an emergency fund.
Ramsey suggests setting aside 15% of your income for retirement goals.
Many things in life are unpredictable, especially medical issues. So, you must have emergency funds set aside just in case. Some analysts say you should have at least three to six months’ worth of living expenses set aside with it.
And, if you don’t have one set up, start small with an emergency savings goal of at least $1,000. Sure, it’s small, but it’s a safety net, and it’s a start. If you can put away about $85 a month, you’ll reach that goal and have some wiggle room.
Such an account should only be used for a true emergency. Don’t touch it if you need money for a vacation, or if you want to go to the casino. Also, keep this account liquid. It should be easily accessible at all times.
Max out your contributions to retirement accounts.
Accounts with tax advantages – 401(k)s, IRAs, health savings accounts, etc. – are great ways to save and invest for the future. In many cases, contributions to these accounts can help cut your taxable income.
If you’re older than 25, put away at least 15% of your household income into retirement (only after you become debt-free and have an emergency fund). Easier said than done. But start with something and work up from there.
Second, if your employer offers a 401(k) match, try to invest up to the full match amount. So, if your employer offers a match up to 6% of your pay, try to max out your contribution. According to Ramsey Solutions, eight out of 10 millionaires invested in their company’s 401(k) plan.
Put extra money aside for retirement instead of spending it on anything.
“An example from Ramsey Solutions highlights how people under 40 can save $1 million for retirement. If someone is making $80,000 annually, they would need to invest $1,000 per month to reach that 15%. Putting that into “good growth stock mutual funds” could bring in more than $1.5 million in a retirement nest egg by age 65. Holding off retirement another five years could result in $2.8 million,” added Benzinga.com.
Plus, along the way, be sure to check in with a financial advisor for more advice. In the end, even if you’re behind on saving, there’s always a way to build a nest egg and eventually retire. And even if you don’t think you can do it, at least give yourself a fighting chance.
In addition, as noted by PriviegePress.com, “Here is the simple translation of Dave Ramsey’s blunt 401(k) path for someone who is late and at zero. Stabilize the month so one emergency does not floor you. Attack the debt that keeps stealing from your future. Lock in repeatable contributions inside the plan you already have access to. Choose a simple fund so you do not stall on selection. Increase the rate on a schedule. Ignore market noise that tries to make you feel smart or dumb. Treat the balance like a paycheck you are sending to your future address.”
Again, if you’re concerned, there’s still time.
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