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The Ins and Outs of Saving for Retirement

The Ins and Outs of Saving for Retirement

By Monday, 08 May 2017 02:33 PM Current | Bio | Archive

Throughout your working life, you need to put money away for retirement. Everyone knows this. Unfortunately, a lot of people don’t actually practice it. A third of American adults have no retirement savings whatsoever. Of those who HAVE saved some, 23% have under $10,000.

Part of the problem is that people tend to see retirement as a long way off. They haven’t started saving anything yet, but there’s plenty of time to build up a nest egg before they’ll actually need it. Then before they know it, retirement is right around the corner, and they haven’t put away nearly enough to live on.

So when SHOULD you start saving for retirement? How much do you need to put away?

The answers can be complicated, but there are a few rules of thumb that can help you along the right track.

When Should I Start Saving for Retirement?

The simple answer to this question is, “10 years ago.” No matter how old you are or what stage you are in your life or career, it’s never too early to start saving for retirement. The longer time you spend saving, the more money you’ll have at the end, as your investment increases and the returns compound.

Maybe you’re still young, and retirement seems like a long way off. But consider this: if you start contributing to a 401(k) in your first job out of college, and continue to do so throughout your life, you may be able to save up enough to retire early.

On the other hand, maybe you’re not at the beginning of your career. Maybe you’re nearing the end of it. With just five or 10 years until you hit retirement age, and nothing in savings, it’s far too late to start building up your nest egg now, right?

Not at all.

If you can put away $20,000 a year for those five years, then with an average growth rate of 8%, you’ll have well over $100,000 saved up by the time you retire. Even if you can only afford to put away a small amount each year, every bit counts.

How Much Should I Save for Retirement?

The simple answer to THIS question is, “As much as possible.” The maximum contribution limit for a 401(k) in 2017 (and for the two years before it) is $18,000, or $24,000 if you’re over the age of 50. The maximum amount you can contribute to an IRA each year is $5,500, or $6,500 if you’re over 50. If you can afford it, it’s important to contribute the maximum amount every year. And if you can’t afford it, find ways to cut corners and otherwise adjust your household budget until you CAN afford it.

It’s fairly common to underestimate the amount you’ll need in your retirement. Some people don’t adjust for inflation. If their target is, say, $100,000 total, they forget that, as prices go up, $100,000 20 years from now won’t take them nearly as far as $100,000 today.

Others simply underestimate how long they’ll live once they leave work. They save up enough to get them through 15 or 20 years of retirement, then they end up living 25 of 30 years and deplete their savings.

Some people simply assume they can rely on social security to support them. This is unwise for two reasons. First, even if you hold off until 70 to collect the maximum benefit amount, it likely still won’t be enough to live on. Social security payments are adjusted annually for cost of living increases, but the adjustments tend not to reflect actual inflation amounts. For example, this year, benefits went up by about 0.3%. Meanwhile, inflation has gone up 2.4% in the last 12 months—8 times more than the benefit increase amount.

Furthermore, experts project that, as more money continues to be paid out than goes in, the social security fund will be completely depleted by 2034. At that point, benefits will only be able to match what’s being paid in each month to those still in the workforce, and monthly checks are expected to go down to about 79% of their current value.

Finally, some people—particularly younger workers—plan to circumvent their need for retirement savings by simply never retiring. 83% of millennials say they plan to continue working in some capacity even after they reach retirement age.

For many who don’t have a nest egg, this is a necessary course of action—but it’s not always feasible. As you get older, and your health deteriorates, some illness or other affliction could leave you physically or mentally incapable of working. Or your company could simply downsize you. According to the 2017 Retirement Confidence Survey, 48% of retirees ended up leaving their jobs sooner than they’d intended. You never know what life may bring. That’s why it’s important to have a nest egg, to cushion the blow if something unexpected happens.

That’s also why it’s essential to include a safe haven in your investment portfolio. Even if you are putting money towards retirement, the markets are volatile. A sudden decline could wipe out your savings in the blink of an eye. However, the more you diversify your portfolio, the better you’re able to guard against such unexpected downturns.

That’s why gold and silver IRAs are an important part of your retirement portfolio. As physical assets, gold and silver aren’t subject to inflation and don’t have the volatility of the stock markets. Instead, they retain their value, trending upwards over time. So if your stocks suddenly plummet, you have a safety net to fall back on and keep you from losing your savings.

It’s never too late to start saving for retirement, but you can also never start too early, or save too much. If you’re not currently building up a nest egg, start doing so immediately.

The sooner you start thinking about the future, the more prepared you’ll be for whatever life throws at you.

Trevor Gerszt is America's Gold IRA Expert, CEO of Goldco Precious Metals, and holds a position on the Los Angeles board of the Better Business Bureau.

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Throughout your working life, you need to put money away for retirement. Everyone knows this. Unfortunately, a lot of people don't actually practice it.
Saving, Retirement, Gold, IRAs
Monday, 08 May 2017 02:33 PM
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