Planning for the future never seems like a fun activity, but I actually enjoy imaging what my future holds. I like to imagine what my budget will look like after my credit card debt is gone and I’ve got a decent emergency fund in place. I think about all the household improvements and projects I’ll do once I have no payments to make each month and all the other fun things I can do once my money belongs to me and not to lenders and banks.
I also like to think about what my retirement will be like someday. Retirement might seem like it’s a long time away, but I know with the way that time has been passing so quickly these past few years, it’ll be here before I know it and before I’m ready if I don’t make it a priority.
Though it goes against the advice of some of the big name financial gurus out there, ahem Dave Ramsey ahem, I’ve decided to continue saving for retirement even though I’m currently working my way out of about $18,000 of credit card and student loan debt. Here’s what I’m doing now and what I plan to do in the future to ensure that I’m ready for retirement.
Save at Least the Minimum
When I got my first office job at the ripe old age of 19, my dad sat me down and told me about the retirement plan and options that would be available to me so I could start saving for retirement. He told me to always save at least the minimum into my employer-sponsored 401K so I could get the full match.
When you save at least the minimum to get the full employer match, you are taking advantage of free money, and in some cases you are getting a 100% immediate return on your investment.
Increase Contributions as You Are Able
The plan I’m currently enrolled in through my employer has an option to automatically increase your contribution percentage by 1-5% annually. All you have to do to sign up for the option is specify how much you want to increase your percentage by, from 1-5%, and the date to automatically make the increase.
While I think this is a great option, I’m not currently enrolled in it as I like having total control over my investments. Instead, I manually increase my contribution percentage when I feel comfortable. For instance, one year I didn’t get a salary raise and the percentage being with-held from my pay for taxes was increased so my monthly take-home pay went down about $20-30. I decided not to increase my retirement contributions because I didn’t want to decrease my take-home pay any more. Then the next year I got a hefty pay raise and I increased my retirement contributions by an amount that I felt comfortable with.
Roll-Over Your Contributions
I’ve worked for two different employers that offered retirement plans now. When I left my first job I had only about $3,500 saved up in my retirement plan but I knew that I didn’t want to pay a huge penalty for withdrawing the money early. Instead, I decided to roll it over into an IRA. This allowed me to invest the money in funds that I wanted so my savings would keep growing (hopefully) and I wouldn’t be adversely affected at tax time.
I’m so glad that with all the financial mistakes I’ve made over the years, not saving for retirement hasn’t been one of them.
Are you saving for retirement? Why or why not.