Most of us don’t save for retirement since it seems so far yet apparently time fly’s Concord and before we notice we shall be old. The earlier we start planning for our future the better it will be for us. We may not earn the huge salaries we want or may seem not to have the money to save for retirement but we often forget what we have working for us is our young age. Just as Darren Hardy says in his book the compound effect, the small efforts we make to save for our retirement in our young age will have a huge difference when we get older. Let’s not forget we will one day get old and more importantly, let’s not retire into poverty. Being a pension’s consultant I see this reality every single day. It is so sad to work all our years only to live a miserable life after retirement just because we didn’t plan for it. Here are a few tips to help us avoid this tragedy:
Pay yourself first
I know what we earn will never be enough hence we need to treat our retirement savings as a critical monthly expense. it’s wise to take that money off the top of our income and not from what’s left at the end of the month, then adjust our monthly spending habits and think about ways to free up cash. Moreover, paring down our expenses may not be as difficult as we think. Sacrificing small luxuries can add up to significant savings when spread across an entire year.
Make the most of our employer match
Most of us are fortunate enough to have employers that have set up pension schemes for their employees where contributions are mandatory. However, most of us don’t even know that our employers offer to match our pension contributions up to a certain percentage as an employee retention tool. We need to reread our employment contracts or ask our HR managers. If our employers offer such a retirement plan, don’t leave that “free money” on the table! Contribute additional contributions to the maximum our employers can match. Moreover, since our contributions are taken from our pay before our employers withhold income tax, we may be able to reduce our tax bill, and more of our money will be able to go to work for us. If your employer doesn’t provide a match, it’s still important to invest as much as we can now and let our earnings have an opportunity to work in our favor.
Open an individual retirement account (IRA)
For those whose employers do not offer retirement plans, we may want to think about opening an IRA. Let’s not sit and do nothing just because our employer is not offering the benefits. We need to be proactive, start contributing to an IRA. The only difference between our employer’s pension scheme and an individual one is that IRA contributions are after tax. Moreover, even If our employers do offer retirement plans we are allowed to have an IRA where we can invest as much as we may wish. Moreover, most IRAs offer more investment choices than the tradition pension schemes. And remember even self-employed individuals can open an IRA.
Be an investor
We don’t only have to contribute to a pension scheme to save for retirement. For those who don’t want to go the pension’s way, investing can be an excellent way to secure wealth for retirement. I personally love this as it enables me to be more in control of my funds. I find pension schemes and IRAs to be risk averse in their investment strategy and honestly, I understand why; Pensions are more of wealth preservation rather than growth. I, however, believe that we young people should be more of risk takers. We, therefore, can invest on our own, however, we need to ensure we have a vast pool of investments that can offer us considerable income to sustain our lifestyles hence the earlier we start the better. Get the services of a financial advisor to guide you through the different investments options especially for those of us with no financial background. Do not make investments blindly.
Be a business owner
I am a big believer that business/entrepreneurship is not meant for everyone, however, I also believe we are not all the same. Some of us do have the entrepreneurial gene in us. For those of us with the gene, we can start a business to take care of us in retirement. However, I must insist there is a vast difference of being self-employed and a business owner. In saving for retirement I mean the later. We need to grow our start-ups and integrate processes to ensure our businesses can run without our presence. Remember at an old age we will have no energy to run the business however it should still be able to provide us with consistent cash flows to sustain our lifestyles in retirement. So the earlier we set up the business, the better. Let’s not wait till retirement or a few years before retirement to set up the business.
And as Dwight L. Moody once said “Preparation for old age should begin not later than one’s teens. A life which is empty of purpose until 65 will not suddenly become filled on retirement.”