The Art of Saving for Retirement
Handling your finances and ensuring you have enough ‘savings’ for old age can be a difficult task, but if the Americans can do it, so can you. One of the ways you can successfully accomplish the goal of a comfortable retirement is to set benchmarks which would enable you to compare your savings to those of people in your age group.
This could be instrumental in managing your retirement goals and also serve as a motivational mechanism to ensure you don’t take your eye off the ball, with the proverbial ball being your post retirement goals.
Average Retirement Savings
People in their 20s are usually burdened by student loans which can be tough to overcome but millennials are fast outpacing their student loan debts with an average annual salary of $40,352 which theoretically puts them on track to amass half of their yearly salary in savings by the age of 25 and 100% of their annual salary by the age of 30.
Upon entering the age of 30, expect an increase in your average expenses in light of drastic changes which can include marriage and children. This can make it more difficult to maintain your savings account but according to BLS, the average income over 35 also jumps to $50,752 which means that people in their late 30s can expect to have 200% of their salary in the form of savings, a number that can jump to 300% by the time you are 40 years old.
And by the time you reach that age, statistically you are in your peak earning years along with drastically reduced debt, but the cost of education for children also increases substantially as they get ready for college. Americans in their 40s earn slightly above $67,000 on average with an expected savings account balance of $81,349.
By the time you enter your 50s, 401(k) or a retirement account is your best bet since savings start to add up significantly. Figures suggest that the average family savings of an individual in their late 50s is in the ballpark of $160,000.
How to save for Retirement
Experts recommend that saving 15% of your gross annual income is a safe benchmark which should ensure a comfortable retired life and the sooner you start saving, the easier it will be in the later stages of life.
Starting with a favorable 401(k) plan offered by your employer is a step in the right direction but it is recommended that you work with a financial advisor to work out the options available to you, choose the one that is most suitable and makes the most sense financially.
According to NerdWallet, the average household income has grown by 20%. In contrast, the average household expenses have also grown by 18% which means that most of people in working class are not managing their finances effectively.
If 401(k) is not a feasible option then there are plenty of opportunities of investment in other areas; investing in the stock market can be a major source of passive earning in your retirement but it is important to diversify your investment portfolio to ensure that your risk is evenly distributed and balanced.
If stock trading is too risky for you then investing in bonds is a much safer bet, although the stock market does offer higher rewards (countered by high risk of course!). Additionally, you can create a budget plan for your expenses to ensure that you don’t go overboard with your household expenses including educational fees, holidays and shopping.
One in Six Retirees a Millionaire
That’s right, the number of American pensioners who are millionaires has tripled since the economic crash of 2008 which means non-Americans have a lot to learn from them.
According to consultants, American pensioners have made wise life choices by investing in property, stock market and divulging in favorable pension schemes which have seen them reap the benefits in old age.
Successive generations can take note from these pointers to ensure that their life savings are invested in the right place which will maximize their wealth in later years.
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