At first blush, saving for retirement and handling your finances can seem like a complicated task. If you are less than confident in your abilities, directing your financial life and deciding how much you need to save for retirement can seem like an impossible goal. Answering the question of how much you need to save for retirement should not be taken lightly, you need a streamlined process for saving and investing for retirement.
Things like money, finances and retirement investing can seem complicated, they are actually simpler than you think. In the end, making a complicated mess of your finances will be counterproductive, and sometimes the simplest approach is also the most effective.
Here are some strategies and resources to help you streamline your finances, so you can save more and get a retirement plan started.
1) Consolidate Your Savings Accounts For Higher Interest Rates And Lower Fees
Most financial experts all agree that you should have an emergency fund savings account as part of your financial and retirement planning. If you have multiple bank accounts at several different institutions, you could be paying more in fees and getting less in interest than you deserve. Consolidating your bank accounts under a single umbrella does more than streamline your savings – this simple move could increase the interest you earn while reducing, or even eliminating, the fees you have to pay.
Many banks waive monthly service charges and other costly fees for accounts over a certain size, so consolidating your money in one place could make you eligible for those waivers. And if you choose your bank based on interest rates, you could earn more on your savings. That means your money will be working harder, and you will be getting more.
2) Embrace The Passive Approach To Retirement Investing
Many would-be investors are frozen into inaction by the dozens of investment choices they have to choose from. The typical 401(k) plan, for instance, might offer five or six stock funds, a handful of bond funds, a savings component and even the chance to invest in company stock.
With so many choices, making a decision becomes harder rather than easier, but there is a way to simplify the process and avoid under performance. So called passive investing has been gaining traction in recent years, and for good reason.
Compared to their actively managed counterparts, passive investments like index funds offer lower expenses and performance that mirrors their stock or bond market benchmarks. If you cannot decide between so many choices, choosing the index fund option can make a log of sense.
3) Automate (and Steadily Increase) Your Retirement Plan Contributions
When faced with a choice, it is easy to do nothing. That is why so few people exercise as much as they should – and why so many employees never sign up for their workplace retirement plans. Simply enrolling in a 401(k) or 403(b) can mean filling out complicated paperwork and raising contribution levels every year can be just as difficult.
Fortunately, many employers now offer automatic enrollment and automatic escalation for their workplace retirement plans. Under these simplified plans, new hires are automatically enrolled in the plan unless they opt out, and contributions are automatically increased year after year.
Allowing this automatic enrollment and escalation to happen can simplify your investment life and vastly improve your finances down the line. If your employer offers such a plan, signing on is the no-brainer thing to do.
How Much Should You Save For Retirement?
There is no right or wrong answer for the question of how much you should save for retirement (I believe in putting 10% of all earnings away for the future.) Financial planning for your day to day life and long term retirement goals is best left up to a financial planner you can trust, or you can always manage your own finances too.
Here’s a list of resources to help you decide how much you should save.
- Retirement Savings Calculator
- How much should you save by 30 or age 40?
- How much per month of your income for retirement savings?
In The End
Dealing with your finances can be difficult, but there are steps you can take to make it easier. If you are ready to take charge of your money and get more for your hard work, the streamlining strategies outlined above can help you get started.
Are you saving a lot of money for your retirement? If you’d like to share some insight, comment below.