Retirement planning: why you should start saving and investing now
Many of us spend our lives working hard and looking forward to retirement, but often don’t think about how we’ll actually get there or what we’ll need financially once there. That’s why we’ll delve into why it’s so important to save and invest for retirement now rather than later. We’ll provide tips on enhancing your savings and achieving your retirement goals, regardless of your age.
Why is it important to save and invest for retirement?
Saving and investing for retirement is important because it gives you the financial freedom to live the lifestyle you want in retirement. It also gives you peace of mind knowing that you have enough money to cover your expenses.
They say the best time to start saving for retirement is in your 20s; the next best time is right now. They are correct! The earlier you start saving and investing, the more time your money has to grow. And that can make a big difference in your overall financial picture when you retire.
For example, let’s say you start saving $200 per month at age 25. If you continue making that same contribution each month and earn an annual return of 8%, by the time you reach age 65, you’ll have saved nearly $430,000.
Now let’s say you wait until age 35 to start saving $200 per month. If you still earn an annual return of 8%, by the time you reach age 65, you’ll have saved just over $225,000 – less than half of what the earlier saver accumulated.
The power of compounding really comes into play the longer you save. But, to counter starting to save later in life, you’ll need to increase your monthly contributions to get to the same eventual payout.
Retirement investment strategies by age
If you’re in your 20s, you may not have started thinking about retirement yet. But it’s never too early to start saving. Invest in a 401(k) or 403(b) plan at work and start contributing as much as you can. If your employer offers matching contributions, take advantage of that free money. You can also open an IRA and contribute up to $5,500 per year ($6,500 if you’re 50 or older).
If you’re in your 30s or 40s, start ramping up your savings. Invest in a mix of stocks and bonds to diversify your portfolio. Consider saving even more in a Roth IRA to take advantage of tax-free withdrawals in retirement. And if you have children, start planning for their college education so that you don’t have to tap into your retirement savings to pay for it.
In your 40s and 50s, you should be maxing out your retirement contributions. If you haven’t already done so, open a Roth IRA and start contributing the maximum allowed yearly. You may also want to investigate investing in annuities or other income-producing investments to supplement your retirement savings.
Take advantage of catch-up contributions to retirement accounts. You can contribute up to $6,500 extra per year in a 401(k), 403(b), or IRA. Consider investing in assets that generate income so that you have a steady stream of cash flow when you retire. And if you have enough saved up, consider making charitable donations from your retirement account. This can help reduce your taxable income and simultaneously give back to your community.
How can CVF Credit Union help you with retirement planning?
CVF Credit Union employs expert financial advisors who can take you through why it is important to save and invest for retirement and how to do it regardless of age. These professionals can help you create a retirement plan tailored to your unique situation.
The group also offers various educational programs to help improve your financial literacy. Most importantly, CVF Credit Union can provide access to special retirement products and services. These products can be a great way to supplement your other retirement savings plans.
No matter what your retirement goals are, CVF Credit Union can help you achieve them! Get in touch today.