We get it, you’re a busy person. Between hustling at work, balancing a social life and finding time to simply de-stress, the last thing you probably want to do at the end of a long day is think about your path to retirement.

And you’re certainly not the only one who feels this way. A recent study conducted by Northwestern Mutual found a shocking 21 percent of Americans haven’t saved a dime for retirement, while another 10 percent have less than $5,000 saved. On average, Americans have managed to stash away $84,821 (hint: that’s not enough).

If this report shows us anything, it’s that Americans aren’t taking their retirement savings seriously enough. But you can be the exception to this statistic. Take a look below at six beginner steps to get you on the right track to saving for those golden years.

 

Start early

The most difficult step in kickstarting your retirement savings is also the most beneficial, and that’s starting as early as you possibly can.

Seems like a pretty obvious tip, right? Well, yes, but the magnitude of how much you can save in just an additional 5 – 10 years might surprise you. Take this scenario provided by the New York Times as an example, where the author compared how much a person will save for retirement starting at age 22 vs. 32.

If both of these hypothetical people put away $5,000 each year, earn a 6 percent return on their investments annually and stopped saving for retirement at 67, the 22-year-old would have about half-a-million dollars more in retirement than the 32-year-old. This scenario shows just how important it is to start saving ASAP.

 

Contribute to a retirement savings account

Stashing money under a mattress may qualify as saving, but you haven’t truly milked your earnings to its full potential until you’ve opened a retirement savings account. Essentially, these accounts are a service provided by the government that provide tax benefits if used for retirement savings.

A retirement savings account comes in many different forms, and one of the most popular ones is the 401(k). A 401(k) is an employer-sponsored account that allows workers to set aside a portion of their earnings before taxes are taken out. Those using a 401(k) are only required to pay taxes when they eventually withdraw the money for retirement. A 401(k) is used among for-profit employers, meaning anyone working for a non-profit will likely be saving their earnings in a 403(b).

There are a number of other options for individuals who aren’t being offered a 401(k) at their workplace. With an Individual Retirement Account (IRA), anyone is allowed to contribute up to $5,500 a year. Another viable option is the Roth IRA. Unlike a regular IRA, a Roth IRA requires individuals to contribute money that’s already been taxed.

Other retirement saving account options include the SEP IRA, Simple IRA, a health savings account and a solo 401(k), among others. We encourage you to check out this rundown of how each account works before deciding which is the right choice for you.

 

Take advantage of your employer’s retirement contributions

Some employees are lucky enough to work for a company that offers to match their 401(k) donations. If this is you, take advantage of this perk ASAP.

When we say an employer “matches” a 401(k) plan, this means they promise to chip in a set amount of money into your retirement account per every dollar you contribute. Some companies will match dollar for dollar, while others might only do 50 percent or less. Either way, this is a perk you definitely don’t want to miss out on. Talk to your employer today to explore your retirement options before it’s too late.

 

Evaluate how much you need to save

Once you’ve decided where you’re going to invest your retirement savings, the next step is to figure out exactly how much you’re able to contribute. While this rule isn’t set in stone, many experts agree it’s reasonable to set aside 15 percent of your annual earnings for retirement. This will vary from person to person depending on age, salary and other factors.

One way to determine how much you should set aside each month for retirement is by using a retirement calculator. We recommend checking out this calculator provided by CalcXML, which factors in your age, annual income, expected return on investment and more to give you a road map for retirement.

 

Maximize your savings whenever possible

It’s always a good idea to take a step back and re-evaluate your retirement plan once you’ve gotten into the groove of saving. Let’s say you recently got a raise at work, came into an unexpected amount of money or recently moved into a new home where rent is even cheaper than before. These are all great excuses to maximize your retirement savings, and perhaps even readjust how much you’re contributing on a monthly basis.

You don’t have to increase your savings by much to see a big difference. This could be as little as 1 percent of your annual income. In a hypothetical provided by Fidelity, a 35-year-old earning $60,000 annually could have an additional $85,492 for retirement by saving only $12 extra dollars per week. As they say, slow and steady wins the race.

 

Avoid cashing out your retirement savings accounts

A 401(k) and IRA can be extremely beneficial so long as you don’t break the rules provided, and one of those involves early withdrawal. Today, an individual who decides to cash out their savings before age 59-and-a-half will be penalized with a 10 percent additional tax penalty. Depending on when you opt to cash out and how much you have saved, this could prove to be a huge blow to your savings.

While we don’t encourage you to dip into your retirement savings account too early, there are a number of ways you can cash out before age 59-and-a-half without getting penalized. Individuals can qualify to use retirement money without the tax penalty if the money is being used to cover college, health insurance following a period of unemployment, and even the purchase of your first home. Make sure you understand the rules and regulations of your account before making any quick decisions.

 

 

 

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