10 Ways to Save for Retirement

In the aftermath of the Global Financial Crisis many people are wondering how they are going to be able to retire on their now depleted portfolios. Some are now planning to work longer, while others are looking for ways to avoid the same situation. Therefore, following are 10 pieces of advice and retirement savings strategies to help you feel more secure in planning for your golden years, and ways to ensure they truly are solid gold and not just gold-plated.

Why You Need to Think About Your Retirement Now

Financial experts agree that you will need around 75 per cent of your current income to maintain your standard of living after you retire. This is a general figure and of course depends on whether your mortgage is paid off, if you have other debts, and how you plan to spend your retirement. The 10 tips below address these issues.

It is also important to know that 50 per cent of working Americans who are actively saving for their retirement have less than $25,000 saved, and 70 per cent who are not saving for retirement have less than $10,000 in a savings account. This is why you need to start thinking about your retirement savings plan now, because it is a good chance to get your finances in order and start working towards some truly meaningful savings goals.

1. Curb your spending and plan your budget

Making a clear budget will help you with the rest of these tips and will help you clarify the standard of living you have now, what you can go without and what you’d really like to be able to afford. You’ll also be able to see how much money you are directing to your bad debts such as credit cards, and whether there is any extra spending room to pay down your mortgage faster.

When starting any savings plan it is important to first remove any bad debt like credit cards or personal loans. Any interest you earn in a savings account will be cancelled out by the interest you are paying on your debt, so budget to pay more than the minimum monthly repayment to wipe out that debt as soon as possible.

Once you have your debt under control, get your spending under control too. This means analyzing all of the luxuries in your budget and deciding which are necessary and which can be cut back on or removed all together. You don’t have to cut back on all your indulgences and you don’t have to cut back forever either – you can create a savings plan for six months or a year where you channel as much spare cash as you can into a high interest savings account to give it a boost, before sticking to a more flexible savings plan for the long term.

2. Know how much you need for your retirement

This is where your budget will help you again because you will be able to calculate which expenses will be constant when you retire and which will go up or down. Your fuel expenses may go down when you retire, for example, because you’re not driving to work every day, and so too may your food bills because you’ll be able to make more meals at home and avoid fast food and take away. Your mortgage repayments may be reduced, but hopefully paid off entirely when you retire so this part of the budget will be less too.

At the same time your entertainment portion of the budget will increase, and this is where you will decide how you want to spend your retirement. Is it important to have an overseas trip twice a year, or do you plan to purchase a boat and sail the local seas fishing? Will you move to a smaller house or will you keep your larger house to accommodate a growing extended family?

All of these factors influence how much money you need in your retirement savings account, and are important in helping you plan a way to achieve that retirement savings goal.

3. Know when you plan to retire

While we’d all love to retire tomorrow, that’s not always possible, so set a realistic retirement time frame. Would you like to retire at 60 or work to the traditional 65? Or perhaps you’d like to keep working part time until you’re 75 to keep active and maintain your working relationships.

These decisions will determine when you need your retirement savings to reach that magical number which means you have enough funds, and it also helps you determine how much money you will need. For example if you imagine you’ll live until 100, if you retire at 60 you need your retirement fund to last you 40 years, but if you retire at 75 you only need it to last 25 years. That can make a big difference in funds.

4. Save your windfalls

As for the practical retirement savings advice, from our first tip you know you need a high interest savings account to keep your savings separate from your everyday spending money, and to help you earn interest on your way to your retirement goal. So what else can you put in your retirement savings account?

Save every little windfall which befalls your finances and you will be surprised at how quickly your retirement savings can grow. Put your tax return straight into a savings account, along with any gifts of money for birthdays or Christmas, or inherited money. Plus, whenever you get a pay rise, have the additional money transferred directly to your savings account, and continue to have the same amount of money deposited into your everyday account each week. In saving the difference between your old and new wage, you are saving without even realizing it – it doesn’t get much easier than that.

5. Dedicated retirement savings accounts

Find out about specialized retirement savings accounts available to you. Some retirement savings products will allow your contributions to be taxed at a lower rate when you withdraw them for your retirement, and most retirement savings accounts will have a lower fee structure too.

There are differing retirement savings accounts available depending on your contributions and your age, but it is worth finding out about the incentives and assistance which is available to you. All you have to do is ask your bank, accountant or financial advisor, because someone who knows your financial situation will be able to advise you on the best retirement savings account for your needs.

6. Retirement fund

Depending on your job or career, you may also be eligible for employer contributions to a retirement fund. A retirement fund is an account held by a specialized investment institution that manages your contribution to keep it growing, while you keep working and your employer keeps contributing. Retirement funds are also tax protected, and even if you are able to access the money, it makes sense to leave it in the fund until you retire.

7. Salary sacrifice into a retirement fund

Choosing to negotiate a salary sacrifice with your employer can also help you save for your retirement as you can have a portion of your wage deposited directly into a retirement fund so you are saving for your future. Plus you will be taxed in a lower tax bracket because you have a reduced wage.

8. Make retirement fund contributions for your spouse

If your spouse is earning below a designated amount, in some cases you are able to make contributions to a retirement fund or a retirement savings account in their name. These contributions are also eligible for tax benefits, while accumulating retirement savings for both you and your partner.

9. Consult a financial advisor, now and into the future

Managing your finances can be a full time job, especially if you are looking for a way to aggressively grow your retirement savings or recover from a recent loss of retirement funds. The fees of a financial advisor are generally tax deductible, and having someone advise you on the savings and investment options which are best for your current situation, and which can help you achieve your dream retirement, is well worth the investment. Also be sure to seek a professional who can stay with you and continue to give advice as your life situation changes over the years.

10. Start as soon as possible

You may want to start saving for your retirement right now, but if you have credit card debt or are unprepared for a retirement savings plan then you are not going to effectively achieve those goals. Instead, work your way through these 10 tips before you start saving for your retirement to make sure you don’t waste any time when you do start saving.

At the same time it is important to start saving for your retirement as soon as possible, as there will be less ground to make up and more time to save the amount you’ve been dreaming of.

Fred Schebesta writes for Savings Account Finder, where he helps people to compare savings accounts and term deposits.