Retiring can be a daunting prospect. When you’re used to collecting a steady paycheck, the idea of losing it and relying on savings and Social Security can be overwhelming.
The good news? A few simple moves on your part could set the stage for the retirement you’ve always imagined — one that’s fulfilling and devoid of financial stress. Here’s how to pull that off.
1. Save from an early age
Giving your savings time to grow is just about the best thing you can do for your retirement. Imagine you start socking away $300 a month at age 22, right when you first enter the workforce. If you invest that money at an average annual 7% return (more on that in a minute), you’ll wind up with just over $1 million by the time you reach age 67. Wait just five years to begin saving, however, and you’ll end up with $719,000. That’s still impressive, but it’s a lot less money to live on.
2. Save aggressively
The 7% return we just used in our example? That assumes an IRA or 401(k) that’s invested heavily in stocks. If you play it safe with your investments, you could end up scoring a much lower return that limits your savings’ growth. If you were to go heavy on bonds in your retirement plan, you might only enjoy an average annual 4% return on your investments. And in that case, you’ll end up with just $436,000 instead of over $1 million, assuming that same $300 monthly contribution and 45-year savings window.