4 ways to establish financial stability for the future
No matter a person's age, the time to think about retirement is now. After analyzing current retirement trends, experts agree, it's time for a cultural mindset shift, from spending to saving.
Posted — UpdatedThe financial weather is forecast to be rainy soon for older Americans, and many have saved little to buy umbrellas.
Not only are many people having a difficult time saving money in retirement accounts, but they’re taking money out of those accounts to pay for living expenses, said Sen. Bobby Hanig of the North Carolina Senate. That does not bode well for the future.
"It will be a crisis of epic proportions," he said. "It’s going to cost us more if we don’t do something about it now."
People may also not be able to count on the federal government for Social Security in the future, said Hanig.
"I don’t think I’m being extraordinary when I say 20 years from now, this is going to be one of the largest financial situations we’ve faced," he said.
However, there are ways workers can save more for their later years. Here are four ideas.
Workers in their teens or 20s should get into the habit of setting aside funds for retirement immediately when they get paid. Even small amounts at this stage of life can accrue to substantial savings several decades later.
"It’s much harder if you don’t do anything until you’re much closer to retirement," said Certner. "We really want people to start early."
Those who were planning to retire in their early 60s may find they’re not financially ready, and continuing at their jobs will bring a double benefit, said Certner.
"When you work longer, that’s one more year of income coming in," he said. "It’s one more year of being able to save money through an employer pension plan, and your Social Security benefits are going up. You’re increasing your savings, but it’s [also] one less year you’re taking savings out. Anybody who’s looking at retirement savings, it’s one way of improving what’s going in and limiting what’s coming out on the other side."
Many people don’t know how they should invest their money nor the kinds of fees they will pay for various services or investments, said Certner.
"Those fees can substantially eat away at their savings," he said. "If you’re talking about a fee that is 1% as opposed to half a percent of your money, over your work life, that small half a point difference is going to make a 15% difference in what the final accumulation is. It’s important to be mindful not only of how your money is being invested but what kinds of fees you’re paying for it."
"It’s an important bill because it doesn’t go after the folks that are putting money into a 401(k)," he said. "This is for the guy who can afford to put $15, $20 a week into this program, so he starts to build something."
Regular paycheck deductions are one of the simplest and best ways to save, said Certner.
"The money is already taken out," he said. "You don’t have to do anything. It’s easy, as opposed to trying to manage that money."
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