Yes, You Should Be Saving for Your Retirement! We’ll tell you how.
For many working women, especially those just starting out, retirement can feel like it's a lifetime away. But any retiree will tell you that the decades come at you fast and it's important that you prepare for your golden years. After all, the only way to retire with a sizeable nest egg is to start now and to save consistently throughout your career.
Why Should You Save for Retirement?
Chances are, you've heard popular phrases like "You only live once!" or "Treat yourself!" that encourage you to spend beyond your means. While there's nothing wrong with having a little fun, this mindset of instant gratification can do more harm than good, as every dollar of yours counts. In fact, a study conducted by the Stanford Center on Longevity found that you should save between 10-17% of your income if you plan to retire when you're 65.
Many rely on Social Security as their only source of income but this isn't ideal because it might not be enough to live a comfortable life. Plus, the Washington Post notes that Social Security is projected to have higher taxes and reduced benefits in the future. Retirement is especially crucial for women as they are more likely to live longer but (unfortunately, for now) they still make less than men in average salaries across practically all industries. Indeed, the US Census Bureau reports that a woman earns 81.6 cents for every dollar a man earns on average.
How to Save for Retirement
Your golden years are the time when you should be able to kick back and relax — and having a healthy nest egg secures that lifestyle for you. That being said, here are some top tips to help you financially prepare for the future.
Save More Effectively
While this may sound like common knowledge, it's important that you save more efficiently, as even the smallest contribution can make a huge difference for your nest egg. Case in point: We've previously shared in our '5 Finance Hacks to Get You Through Tough Times' post that subscribing to many streaming services can burn a serious hole in your pocket. To this end, you can save smarter by creating an effective budget. From spending mainly on your essentials to allotting 20% of your income to your nest egg, keeping track of your expenses can make all the difference for your retirement savings.
Be Smart with Savings
You should be on the lookout for better savings opportunities, as even something as simple as switching from regular savings accounts to high-yield ones can do you a world of good for your future finances. In a guide to high-yield savings accounts by Marcus, it recommends checking the fine print to see how often interest is compounded, as this dictates how much interest you can earn over time. The more often this is done, the higher you could earn. For example, if one savings option compounds interest daily and another compounds monthly, you’d do well to go for the one that lets you earn money every single day until it’s time for you to retire and enjoy your hard-earned cash. Overall, your goal shouldn't only be to save for your retirement – you should also aim to boost your finances even more.
Opt for a Roth IRA
It goes without saying that setting up a 401(k) retirement plan is one of the most popular methods people use to increase their finances for the future. While this will help secure your financial stability, it does come with the setback of major tax deductions. Plus, tax rates tend to be unpredictable and can potentially skyrocket. This is why financial expert Suze Orman suggests investing in a Roth 401(k) plan, instead. Although this requires paying taxes upfront unlike the traditional plan, it gives you the great benefit of withdrawing tax-free in your golden years.
Gigi Fox is a San Jose-based freelance finance writer who’s not just fascinated with how money greatly affects our lives, but also desires to help others spend where it really matters. When she’s not busy reading up on the latest news, you can find her tending to her lemon tree in her backyard.
