When Might Be The Best Time To Start Saving For Retirement?
Written by Brian B

When Might Be The Best Time To Start Saving For Retirement?

Saving money is the first step towards retirement. So when exactly is the best time to start saving?

When To Save For Retirement

The experts suggest that everyone begin saving for retirement as soon as they can. While this maybe seems easier said than done, there are multiple options available for young people to start saving money. A great way to start saving is by putting away 10% of your monthly income each month. If you put 10% of your $5,000 monthly income, this will equal $500 of savings. Putting away $500 per month will lead to $6,000 in yearly savings. Doing this in your 20s can certainly help cover for any stock market dips.

A recent survey conducted by Charles Schwab revealed that Americans believe they need to save $1.7 million by the age of 65. If this is a goal of yours, you will need to save at least $500 per month, starting at age 25. In some cases, saving this amount each month can be nearly impossible. Many 25-year-olds are struggling in the job market and/or busy paying off students and raising a family. If you must kick retirement savings down the road, the amount you’ll have to save each month will undoubtedly increase.

How To Save Money

If you simply can’t afford to begin saving money in your 20s, the experts say the next best time to begin saving money is right now. Put away any dollar amount that you can afford at this point. If offered, jump on your employer’s 401(k) plan right away. Opening a traditional IRA can provide more investment options than the typical 401(k) plan. An IRA will impose a limit of a $6,000 contribution for anyone under age 50.

Thankfully, there are several other ways to begin saving money. If you can’t invest in an IRA or 401(k) plan, it doesn’t mean that saving money is out the window, fortunately. Start by putting away any extra or unexpected cash flow. This could be anything, from bonuses to birthday checks. Try to avoid any luxury purchases, if possible. Put any and all spare change away in the bank. Picking up a part time job could also prove beneficial in the long run.

Age When Americans Start Saving For Retirement

Here’s a look at the age groups when Americans typically begin saving towards retirement:

  • Ages 20-29: 39%
  • Ages 30-39: 25%
  • Ages 40-49: 15%
  • Ages 50-59: 6%

All data is according to Morning Consult.

How To Save For Retirement Without A 401k

Different Ways To Save For Retirement

If you are not offered a 401(k) plan through an employer, there are still many ways to save money now. Try these three savings options.

Contributing to a CD (certificate of deposit) tends to be one of the safest investment options. It is so safe because the federal government insures CDs to never lose value. Another plus is that money can be withdrawn from a CD at any time desired. Being able to withdraw at any point is crucial for anyone encountering unexpected hospital bills, car payments or other bills.

Even if you have already contributed to a CD, opened an IRA and Solo 401k, you can still open a health savings account. The two biggest benefits of an HSA are the tax-free withdrawals and large potential for growth. The only downside is this money cannot be pulled without penalties until after age 65.

Also known as a self-employed 401k, a solo 401k is ideal for those not expecting to make a large yearly income. A solo 401k offers individuals the opportunity to contribute twice, once as an employee and once as an employer. Individuals can contribute their entire yearly income as long as that figure does not exceed $19,500. Employers may only contribute up to 25% of yearly earnings. Solo 401k contributors’ spouses are also eligible for this plan.

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How To Save For Retirement Without A 401k
Written by Brian B

If An Employer Does Not Offer A Retirement Plan, What Might Be Another Way To Save For Retirement?

Saving enough money for retirement without a 401k plan is possible! If you are searching for “how to save for retirement without a 401k“, this article will offer five tips on how to save enough for the future.

Saving Money Without A 401k

Take these five steps in order to save enough money for a happy and healthy retirement:

  • Open An IRA
  • Save Tax Returns
  • Contribute To A CD
  • Health Savings Account
  • Open A Solo 401k

Open An IRA

For individuals without a 401k plan, opening an IRA tends to be the most popular alternative. The two most common IRA packages are the Roth IRA and traditional IRA plans. Both are great investment options for those looking to save for retirement. Anyone who wishes to open an IRA must be currently earning an income; this is basically the one and only requirement. However, if you are unemployed yet married to someone earning an income, you are eligible to open an IRA. This is a common plan chosen by self-employed workers.

Save Tax Returns

It may be difficult in the short term, but saving any and all tax returns will prove fruitful in the long term. Everyone’s gut instinct is to spend the return, but refrain from doing so if you plan to retire without a 401k. Saving tax returns is the simplest way to compile savings today. IRS Form 8888 allows taxpayers to deposit refunds into two or more savings accounts.

Contribute To A CD

Contributing to a CD (certificate of deposit) tends to be one of the safest investment options. It is so safe because the federal government insures CDs to never lose value. Another plus is that money can be withdrawn from a CD at any time desired. Being able to withdraw at any point is crucial for anyone encountering unexpected hospital bills, car payments or other bills.

Health Savings Account

Even if you have already contributed to a CD, opened an IRA and Solo 401k, you can still open a health savings account. The two biggest benefits of an HSA are the tax-free withdrawals and large potential for growth. The only downside is this money cannot be pulled without penalties until after age 65.

Open A Solo 401k

Just because you don’t have a traditional 401k, it doesn’t mean you can’t open an alternative savings plan. Also known as a self-employed 401k, a solo 401k is ideal for those not expecting to make a large yearly income. A solo 401k offers individuals the opportunity to contribute twice, once as an employee and once as an employer. Individuals can contribute their entirely yearly income as long as that figure does not exceed $19,500. The amount will differ when contributing as the employer, though. Employers may only contribute up to 25% of yearly earnings. Solo 401k contributors’ spouses are also eligible for this plan.

When Might Be The Best Time To Start Saving For Retirement?

The experts suggest you start saving for retirement as early as you can. Seems like this is easier said than done, though, right? Well, there are many ways for young people to save right now. Try to put away 10% of your monthly income as a start. If you put away 10% of your $5,000 earned each month, you will have saved a nice $6,000 for the year. Saving 10% each month will help protect you against any unexpected bills or dips in the stock market.

Americans believe they should have at least $1.7 million saved by age 65, according to a Charles Schwab study. In order to hit that mark, you must save $500 per month starting at age 25. It is a lofty goal, but deciding on retirement age and how much you’ll need to save will pay off in the future.

Here’s a look at typical age groups when Americans begin saving money for retirement. All data is courtesy of Morning Consult.

  • Ages 20-29: 39%
  • Ages 30-39: 25%
  • Ages 40-49: 15%
  • Ages 50-59: 6%