Saving for retirement might not be at the top of your list of priorities right now or perhaps you haven’t given it much thought. When it comes to setting aside money for retirement, there is a valuable advantage to start early so you can better maximize those funds over time so you’re in better shape when the time comes to retire. There are several options and tools you can make use of to get you started on saving. That’s why we have compiled a list of resources and tips to help you envision what type of retirement goals you want to have and make a plan to get you there.

The Best Time to Start

Have you ever thought about the concept of compound interest? Compound interest is the addition of interest to on an initial investment and eventually, that interest starts to earn interest on itself. As a result, your principal sum starts to grow and you can look at this as if your money is making more money on its own.

What you should gather from this is that if you want to achieve your retirement goals, the first and most important step you can take is to start saving today. There is no doubt that you currently have several expenses that you need to attend to but don’t let these expenses take your attention away from saving for retirement. The longer you wait to start saving, the less financially set you’ll be for when that time comes.

Before you start saving, it’s worth imagining just what exactly your retirement goals are. Once you know where you want to go or what you want your future to look like, you’ll be more likely to do what it takes to get there. Saving won’t be as easy some months but nonetheless it’s important to stay positive and remember that even a little goes a long way and try to save as often as possible.

Sign Up for A 401(k)

One tool you can take advantage of through your employer is signing up for a 401(k). There are a few benefits to signing up for one that will help you out in the long run. When you sign up, you’re able to deposit money directly into your plan before its taxed so it is essentially a tax break to get you started on saving up. Along with deposits that aren’t taxed, the money that you start to accumulate in your plan has the ability to grow tax-free. As a result, you can watch your money grow and only pay taxes when you do decide to withdraw from your 401(k). Additionally, some employers also offer to match your contributions to your plan. For example, your employer may add a $1 to every $1 you deposit to your account, so our advice is to make use of this benefit and do your best to regularly contribute. Another added benefit of taking part in your company’s retirement plans is that you do not have to manually make contributions to your plan or remember to do so because it is automatically taken from your paycheck.

Be sure to ask your employer about their 401(k) plans and benefits.

Consider a Roth IRA or A Traditional IRA

If you are interested in setting up a retirement plan and your employer does not offer a 401(k), opening an IRA may be the best option for you. Some people might actually prefer using an IRA in place of a 401(k) because of the benefits. When considering an IRA, it’s important to note that there are a few options such as a Roth IRA or the traditional IRA.

Roth IRA vs. Traditional IRA:

• Roth IRA: Your contributions are not tax deductible and use after-tax money. Any time you withdraw money from the account, you will not be taxed.

• Traditional IRA: The contributions you make to this plan are tax deductible. If you plan to withdraw money, you’ll need to pay income taxes on that money.

If you’re ready to open an IRA, the process is simple.

1. Choose an online broker that you want to open your account with.

2. Figure out how you want to fund it. You can choose to have a portion of each of your paychecks deposited into the account.

How Much You Need to Save

After giving your retirement plans some thought, you might be thinking about how much you should be saving. The truth of the matter and the simple answer is that you should save as much as you think is necessary to cover all your expenses. Figuring out how much is appropriate for retirement might be a little tricky and that’s why most experts recommend setting aside approximately 10% to 15% of your pretax income. This estimate should be a good starting point for contributing to your savings.

If you want to get more specific numbers and take into account details such as your pretax income, savings, and how many years until you plan to retire, a retirement calculator could be an extremely useful online tool. A retirement calculator is completely free and will help you determine how much of your monthly income you can set aside for retirement as well as how much money you’ll have stored at the time of retirement.

Start An Emergency Fund

As we mentioned in our “Managing Your Money Through COVID-19” article, starting an emergency fund goes a long way. An emergency fund can provide you with a financial cushion when unexpected costs occur but can also be beneficial to you when saving for retirement. Although you might make plans to contribute to retirement plans such as a 401(k), having an emergency fund can be worthwhile to cover any costs later on. How much you should set aside really depends on each person and situation so it is important to remember that your fund should strive to meet your needs and be a reflection of your financial goals. Starting with $500 is a great and solid start as long as you add to this fund as you go on and setting aside money becomes a financial habit.