I spoke with individuals on a daily basis for a number of years who were terrified about starting to save for retirement. It usually went back to a number of similar reasons, but what they all had in common was simply not knowing where to start. The thing is, saving for retirement, or investing in general, doesn’t have to be that difficult, but it’s the lack of knowledge that holds many back.
Start as Soon as You Can
One of the best steps to start saving for retirement is simple it’s often assumed – start! I know, real original, but it’s incredibly true. There are numerous excuses from the belief that we don’t have enough to invest to not having time. However, that’s all they generally are – excuses. The simple fact is that the sooner you start the better. Time, when it comes to investing in the stock market, can be your greatest ally or biggest enemy. Don’t let it be the latter. You should start saving as soon as you can, I encourage you to start investing in your 20s as time will aid your wealth building greatly.
Take Advantage of Free Money
One of the greatest tools to any retirement plan is right in front of many, and that is the 401k match that many employers provide. The common excuse is not being able to afford to have the money come out of the paycheck. What is often missed though is that it’s free money, and I don’t know anything better than that. 🙂 Added to that, it lowers your tax liability so you get a double bonus. Even if your 401k plan is loaded with high fee funds, you should be able to find a few index funds to put your money in that should serve you well.
Automate So You Don’t Forget
Life is busy and it can be easy to forget putting money aside to be saving for retirement. I understand that and the simplest way around that is to automate your investing. Automation is available in most 401k plans and most brokerages offer automation as well. You can choose from a variety of frequencies, including weekly and quarterly withdrawals and automation is an easy way to get money into action for you. My suggestion is to view it as a bill to yourself that you pay each month and by automating it you’ll be less likely to feel the money coming out.
Saving for Retirement Takes Time, Keep it Simple
Saving for retirement takes time and it can be a lot of work. That doesn’t mean it has to be difficult. Many times I would see individuals make investing too difficult on themselves by engaging in activities they had no business doing. If you’re just starting out saving for retirement, my suggestion is to make it as simple as possible and start investing in a handful of solid index funds. That’ll take a lot of the guess work out of the investing for you and help you to invest with the market as opposed to trying to beat it. If you’re ready for a little more excitement, explore the possibility of adding a few solid dividend paying stocks to the mix.
How did you get started saving for retirement? What are some other simple ways you would suggest for someone to get started?
This post was originally published on December 5, 2013 and updated on October 7, 2020.