Benefits Of Saving For Retirement

2600 Words Jun 8th, 2015 11 Pages
Introduction
You have likely read or heard about the looming retirement crisis in the U.S. The vast majority of adults age 50 and older have very little retirement savings, meaning they will be forced to either work well into old age or significantly decrease their standards of living. Luckily for us, we have time on our side to make sure we are much better prepared. The goal of this paper is twofold: (1) introduce some basic math concepts to you that are important to building wealth and (2) make you aware of a handful of things you can begin doing now to virtually guarantee you do not end up in the same precarious position as the majority of Americans today.

One of the greatest myths about saving for retirement is that you have to
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Most good habits have to be started now, or they won’t get started. Most good intentions don’t die from a frontal assault, but from the idea that you have plenty of time to change. As a result - you don’t change. It is not a question of knowledge, rather that of inertia and discipline.

Priorities:
1. Become more aware of your finances. Figure out how much money you are taking home and subtract the amount you are spending. This is your savings rate. Maximize it.
2. Take the money you are saving and put it to work by paying down debt and/or investing it in tax-deferred retirement accounts.
3. Wait. Continue these good habits over the next few decades. Once the value of all investments is 25-30 times your annual spending, paid work is entirely at your discretion.

Becoming Aware of your Finances
Fundamental to sound financial footing is knowing how much money you are bringing in and where that money is going. Budgeting helps you see your sources of income and what/how much you are spending on expenses. Online tools like www.mint.com (what I use) are wonderful for this and take virtually no time to manage once set up.

I know the word “budgeting” may have a negative connotation because most people think of it as restricting themselves by setting hard limits on spending in certain categories. If you want to do that, I won’t stop you; however, the budgeting I am referring to is simply tracking your spending so that you are aware of how much money you
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