While it may even be decades away from when you finally get to walk away from work and enjoy the life experiences without the day to day grind, it’s not too early to start thinking about retirement. Sure, we can dream about it, but the fact is, whether we like it or not, that dream will become a reality sooner than we think. The more you put off saving for retirement the less you will have as a nest egg. Simply put, the longer you have to save and grow over time, the better off you will be, since you cannot solely rely on Social Security to provide the income level that you’re comfortable with today. By asking yourself a few questions when you start to think about will you have enough, can make all of the difference.
How Much Do I Need?
Sure, you can assume you need as much as possible, but throwing out a random number with little thought will not get you any closer to your goal. In order to really put an accurate number, you’ll need to figure out a few things:
- Will there be credit card debt to try and pay off?
- How about a mortgage payment?
- Monthly utilities?
- Food, gas, spending money built into a budget?
- Should you set aside funds for milestones such as a child’s wedding?
- Is traveling part of the bucket list?
If you figure to retire in your mid-60’s, you can (hopefully) plan on being around another couple decades, so you’ll need enough to last through typical monthly expenses throughout that time, in addition to important life events where you’ll need money set aside. It is not entirely out of the question to require needing over a million dollars in order to be able to afford the current lifestyle you’re accustomed to.
Where Can I Come Up with Extra Money?
If you are now realizing putting in a little every month will not get you to what you need in the end, you’re not alone. So where can you free up extra money in order to increase contributions? You can look at a few places:
- Cut the cable cord and opt for streaming services
- Avoid going out to eat and prepare meals at home for a fraction of the cost
- Ditch the gym membership and get your workout in outside as the weather finally improved
- Don’t miss out on free money
It can be tough to scrape together enough for the bills and spending money, let alone take out more to save for something down the road, but it’s necessary. In regards to ‘free money’, you can use a rewards credit card on purchases that will earn you points or even cashback each year, just on the purchases you were going to make anyways. Also, your employer could offer company matching contributions, so if they offer 6%, make sure you’re putting in 6% as well to ensure you’re getting every free dollar you can. This can add up to tens of thousands built into your next egg by the time you’re ready to retire.