How to Save for Retirement and Not Miss the Money

A recent Wall Street Journal article indicates that 28% of Americans have no confidence that they’ll have enough money saved to retire comfortably.  In the same article, 57% of those surveyed indicate that they have less than $25,000 in savings and investments outside of their home values.  Given that retirement calculators indicate you’ll need much more than $25,000 for retirement, the 57% cited in the Wall Street Journal article have a lot of ground to cover.  Undoubtedly, many Americans are being squeezed by the current less-than-stellar economy, so how can a person save more for retirement when they’re already using their entire paycheck?

A Painless Solution

As an employee, one of the financial benefits I look forward to every year is an annual pay raise.  The pay raise coincides with the new fiscal year at the organization where I work, so I can count on a pay increase at about the same time every year.  One thing I have done recently is increase my 401(k) retirement contribution by 1% when my pay raise kicks in.  The idea is that, if I have not gotten used to the larger paycheck yet, I won’t miss the 1% that automatically goes to my 401(k) account.

If every year you follow the pattern of saving 1% with each pay raise you receive, within several years you’ll have saved more for retirement without having missed the money.  Ideally, you’ll reach a 401(k) savings rate of at least 10%, which will provide a substantial sum for retirement.  In order to have a rough estimate of how much you’ll need saved for retirement, make sure to run through a retirement calculator or two, taking into account your expected retirement spending habits, retirement healthcare costs, and inflation.

Set it and Forget it

Some employers allow employees to sign up for automatic retirement contribution increases.  If this is the case for you and you’re not saving enough, take advantage of the opportunity so that you have one less chore to do come pay raise time.  As you approach retirement, you’ll be thanking yourself for making your life easier.

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