Planning for retirement is becoming increasingly difficult for many Americans. Social Security is only designed to cover 40% of pre-retirement income, and most workers no longer receive a pension. This means that most of your retirement income can come from personal savings.
Saving hundreds of thousands of dollars is hard work, but there are strategies to make it easier: Start now.
It’s easier to save when time is on your side
Time is the most valuable resource in retirement savings, and the earlier you start investing, the less you need to save each month to build a healthy nest egg.
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Even if you can’t save a lot of money right now, it’s better to invest a little money every month than to put it off. The longer you wait, the harder it will be to catch up later.
Say, for example, you can invest $200 a month and earn an average annual return of 8% on your investment. Here’s how much you’ll accumulate over time, depending on how many years you need to save:
|Number of years||Total Savings|
Five years may not seem like a long time in the grand scheme of things, but it can make a tens of thousands of dollars difference when it comes to your savings. If you’re on the fence about whether to start investing now or wait a few years, it’s wise to start now.
Should you still invest during a market downturn?
A stock market crash is always scary, but it’s especially scary when you’re saving for retirement. Investing during a recession can feel like throwing your money away, so is it really worth continuing to invest right now?
The short answer is yes — but it also depends on your time frame.
Even the worst market crashes and recessions last a few years at most. The longest bear market in history (the dot-com bubble burst) lasted 929 days, or about 2.5 years. If you still have a few decades before retirement, the market will recover before you need the savings.
If you’re planning to retire in the next year or so, you may need to be more careful about how you invest. Be careful with your asset allocation, and double-check that your investments are within your risk tolerance.
Protect your money
Investing during a market downturn isn’t easy, but putting off saving will make building a strong retirement fund more difficult. Despite the current market volatility, it is wise to continue investing. Your portfolio may lose value in the short term if stock prices continue to fall, but the market has a long history of recovering from the worst crashes.
Given enough time, the investment should return when the market recovers. By keeping your money in the market and continuing to invest regularly, you will be in a great position to build lasting wealth.
The $18,984 Social Security bonus is beyond the reach of most retirees
If you’re like most Americans, you’re a few years (or more) behind in your retirement savings. But a few little-known “Social Security secrets” can help boost your retirement income. For example: one simple trick can cost you over $18,984… per year! Once you know how to maximize your Social Security benefits, we think you can retire confidently with the peace of mind we all want. Just click here to learn more about these strategies.
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