 Will Social Security be there when many American’s retire? There are concerns that various pension programs established in the past may be drained of cash reserves before workers gain access to the plan.
One of the best ways to establish a fund for retirement is to take matters into your own hands to meet that goal. IRA’s and 401k programs are helping many Americans plan for their future.
As of this writing $5,000 per year can be contributed to a Roth IRA as long as household income is below $169,000 for a married couple filing jointly or $116,000 per single adult. Those age 50 and over can contribute up to $6,000 as part of a ‘catch up’ clause allowing them to improve the potential earnings as they get closer to retirement age.
The problem many people have is how to save $5,000 a year for retirement. Many struggle to pay the bills month to month. The idea of dedicating another $5,000 is an almost laughable notion to many.
Any idea that is useful in saving money is never a very easy idea. In most cases it will require a change in thinking or a change in action. In some case it will require both.
Solutions
Change your mind about purchases.
Everything you purchase will cost the price you pay, but it never ends there. You will pay sales tax and if you buy on credit you will owe interest. Your purchase is paid after taxes so there is also a missing piece to your income pie. When you break down what it costs to own something you may begin to discover how many things you can actually live without. This can lead to more money available for retirement planning. The secondary benefit is the habit of strongly evaluating purchases will remain valuable during the retirement years.
Develop your own retirement plan.
It is possible to develop a part time business that can be dedicated to your retirement income. This could be an actual job in your community or it could be something like a consultant on projects outside your community that you are knowledgeable about. Your experience has value and can be used to develop a retirement plan that may exist within an IRA or through other savings mechanisms.
Downsize whenever appropriate.
This could be the house you live in or the car you drive. It may be possible to sell your home and purchase a smaller one that may fit your current lifestyle better. In that process you might also find that you’ve eliminated a house or car payment. This frees up additional income to be applied to retirement benefits. While the rest of the world is screaming for you to go large you can change your mind and size down to experience long-term gratification.
Eliminate as many recurring expenses as possible.
Magazine and newspaper subscriptions can be eliminated if you are willing to either look the information up online or visit your local library to read the latest. This may seem small, but can amount to a few thousand dollars over the life of your annual renewals. This may also mean you take a strong look at what added fees are assessed on your phone and cable (satellite) bills.
The truth is you don’t have to spend everything you earn now. I know this is something we often learn through advertising, but the truth is a few changes in the way we think about our current finances combined with future planning objectives can allow for an improvement in virtually all areas of our life.
Become Frugal Now
Many companies will hire a business manager to pour over expenses and discover ways to save money. Many of these brave men and women love to find as much money as possible that could stay in the hands of the company. Become your own business manager. Here are a few places to improve savings.
- Comparison shop for big-ticket items and advise the retailers you are doing so.
- Determine if you need both a landline and a cell phone.
- Get quotes from several carriers on any insurance coverage you carry.
- Consider generic prescriptions whenever possible.
- Invest in a home energy audit.
- Convert your checking account to a no fee plan.
- Quite smoking and control trips to the gourmet coffee shop.
In the end your diligence in saving money coupled with your desire to prepare for retirement can provide the right motivation to get on track. Even if you do not have a retirement plan through work you can restructure your lifestyle to accommodate retirement savings. It won’t be easy and old habits may be hard to break, but when it’s your future at stake you may find it possible to make the changes you need.
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There's something wrong with our society and being financially responsible and saving for retirement is not rocket science - all it takes is some self-control and realistic behavior.