- Get your savings started as early as possible
- Be consistent with paying yourself
- Trust that the process works, and be diligent following it
Saving for retirement is a very important thing to do. It’s also one of the best ways to get started saving early, being consistent, and trusting the process. Sadly many people don’t start saving until they’re in their 40s or 50s when it becomes more difficult due to less time left on the clock.
However, by starting out young, you can be sure that your money will grow exponentially over time thanks to compounding interest. This post will go over how you can make this happen with some easy steps!
The U.S. Retirement System
The first thing to do is look at how the U.S Retirement System works because it’s helpful to know what you’re working with. This system has three main pillars:
1. Social Security, which covers retirees and the disabled
Social Security was created to help people who are retired or disabled get by economically. It was originally created to provide retirees with about half of their average income prior to retirement (so if you earned $50,000/year before retiring, the system would cover about $25,000 of your expenses).
Moreover, Social Security can be turned into an annuity, meaning it provides a consistent income throughout the year.
2. Employer-sponsored plans like 401(k)s
Employers have the option to offer employees a 401(k) plan, which is an investment account that’s funded by pre-tax money. Employees who choose this option will pay fewer taxes throughout their work time because they can put money into a retirement account and not have to pay as much in income tax.
Moreover, some employers may also get matching funds from the company that they work for, which is basically a bonus from your employer. This can be anywhere from 2-10% of your income depending on the company.
3. Individual savings plans like Roth IRAs (Individual Retirement Accounts)
Individuals can invest post-tax money in a Roth IRA, which is another investment account that’s funded by after-tax money. And while your employer might offer a 401(k) plan, individuals can also open up their own retirement accounts with various companies like Betterment or Aspiration.
These plans are tax-advantaged, meaning your money will grow much faster than it would in a regular investment account because you’re not paying taxes on the dividends that your investments are generating.
All three pillars work together to help ensure that people have enough money so they can retire.
How to get started with your retirements plan?
If you haven’t started a savings plan yet it’s time to get on track. Your retirement plan should be one of the first things you consider when you get a job. Here’s how you should get started:
1. Start Early:
If you are planning for your retirement, then you should begin as early as possible. The reason for this is that the money invested at an earlier stage will earn more. So, planning for your retirement needs to start from day one of your employment so no matter how small the amount, it’s still worth something.
2. Be consistent:
Getting started with a retirement plan is easy but it’s hard to stick with. Once you have started saving for your retirement, you should stick to it. Allocate a certain amount from your salary for this purpose and ensure that you stick to the budget. Remember, saving for retirement is a long-term project, and consistency in your efforts will help you in the long run.
3. Trust the process:
If you have started early and are consistent with your investment goals, then you should not worry about the time it’s going to take for your retirement plan to bear fruit. With the power of compounding interest, your savings will grow over time. As we mentioned there are three main pillars to the U.S retirement system, so you should work on all three of them.
The U.S Retirement System is an amazing resource that has helped millions of people enjoy their lives after they’ve retired. Being consistent with this system is crucial if you want your retirement to be successful. We hope that this article has helped you in some way and that you will continue to use The U.S Retirement System for years to come!