If you plan properly for retirement, you should be able to put away enough money to sustain your standard of living during your retirement years. Retirement funds are effective because they offer a disciplined savings environment, where you are forced to save a certain amount each month.
Here are 5 steps to help you save for your retirement:
Step 1: Start TODAY
It’s always a good thing to start preparing for retirement as early as possible. If you start saving in your twenties, your money has about 40 years to grow and earn interest before you retire. On the other hand, if you start saving in your fifties, there’s not much time left to add to your savings and your money will only have about 10 years to grow.
Step 2: Choose the right retirement product
Go for a simple and clear retirement investment product and make sure that you fully understand your policy’s terms and conditions. This will help you to make informed decisions when choosing how to plan for retirement.
When it comes to selecting the right retirement product, the most cost-effective way is often to invest through your company’s retirement fund. If you leave your job, you will get the option to transfer or cash in your savings.
If you’re self-employed or your company doesn’t offer a retirement fund, then you can invest in a retirement annuity (RA). Retirement annuities are not affected when you change jobs.
Step 3: Make sure you’re saving enough
Experts suggest that you should save at least 15% of your salary for about 40 years. If you start saving in your thirties or forties, you will need to increase your monthly savings to make up for lost time.
Step 4: Know your retirement fund fees
Some retirement funds are more cost-effective than others. It’s vital that you know how much you’re paying in investment fees. If your investment company is charging you high fees, you will not be able to save as effectively for your retirement.
Step 5: Never cash in your retirement fund
You should never withdraw cash from your retirement savings. If you spend the money you’ve saved, you’ll have to start all over again. Remember that you should always be adding to your savings instead of eating into it.