No matter how old you are, once you enter the workforce, it’s never too early to start thinking about your retirement. Even if retirement is 30 or 40 years away, it can pay — quite literally — to start planning ahead for the day when you can clock out for the last time. In case you’re not sure where to start, here are a few tips and tricks to help you figure out how to start thinking about and planning for your retirement.
The Cost of Retirement
It’s impossible to determine precisely how much money you’ll need to support yourself and your family after retirement. It will depend on a variety of factors, from medical expenses to debt and home costs. On average though, the cost of retirement is roughly $740,000. That breaks down to an annual salary of around $30,000 a year — nearly double the yearly Social Security benefits you’d receive after reaching 65 or 67.
People are also living longer every year. In the 1950s, retirement lasted only about ten years. Today, with a life expectancy of 78 to 80 years in developed countries, retirement can last 20 years or more, and you’ll need to plan for that.
Most adults enter the workforce at 18 with a minimum wage, entry-level job. While that’s an excellent place to start and earn experience, the salaries offered by these positions often aren’t high enough to enable you to start saving for your eventual retirement. It’s recommended to start saving for retirement before you reach 25. That way, you only need to collect 15.4 percent of each paycheck to attain financial stability and independence by the time you’re ready to retire.
If you wait just five years — until your 30th birthday — you’ll have to start saving 30 percent of each paycheck to reach the same level of financial independence. You can avoid such a hefty requirement just by starting earlier — plus, you can get used to taking the right percentage out of your paycheck early so that doing so doesn’t feel like much of a burden throughout the years.
Find a Good Employer
A good employer is your ally when it comes to planning for retirement. Most employers offer some retirement accounts, either an IRA or a 401(k). You can set your contribution to this retirement account automatically from your paycheck.
You should also look for companies that will match your contribution to your retirement fund, which will reduce the amount of money you need to contribute to receive the same results, providing you with more take-home funds every pay period. Depending on the company, they may match anywhere from 10 to 100 percent of your contribution, increasing your retirement fund even more.
Choose a Place to Retire
You may be two or three decades away from retirement, but that doesn’t mean you can’t start looking at places where you want to end up when you punch that clock for the last time. You may change your mind from time to time, but it doesn’t hurt to know some of your best options and keep them in the back of your mind.
There are retirement communities in nearly every city in the country, so it will come down to where you can afford to live and what parts of the country offer the kinds of activities, medical care and other features that you want to enjoy during your golden years. Preparing for retirement early can increase the number of options you have to choose from.
Unless you’re planning to work until the day you die, it’s never too early to begin planning for your retirement — get started now!
Photo provided by the author.