In these turbulent times, it is essential to have something saved for retirement. The insecurity of Social Security, the shaky economy and ever-rising costs make it especially important to have something stashed away for your golden years.
Simply deciding to save for retirement is not enough. Instead, you should know exactly how much money you will need. Ask yourself questions such as:
- Will I continue to work during retirement?
- How much money have I saved thus far?
- What can I expect from Social Security or pension plans?
- What type of lifestyle do I envision for myself during retirement?
- What bills will I have in retirement?
Using Bankrate's retirement calculator can give you a basic understanding of how much money you will need, and whether your current plan may leave you facing a shortfall.
After performing this calculation, make adjustments to your retirement savings to ensure you will have enough when retirement arrives.
Take advantage of free cash
If you work for an employer that matches retirement contributions in a 401(k) or 403(b) plan, don't overlook this perk! Many companies will match a percentage or dollar amount of your contributions. This extra money can quickly add up.
For instance, if you contribute $100 per month and your company matches with an additional $100 on your behalf, you will have an extra $1,200 per year.
Why leave free money on the table?
Also, be sure to invest in right types of assets when saving for retirement. Assets with little to no risk typically generate comparatively small returns, and that may prevent your nest egg from keeping up with inflation. As your purchasing power erodes, in effect you are actually losing money.
If you have years until retirement, consider investing in a mix of stocks and bonds that will put you on track to reach your retirement goals.
Kemberley Washington is a certified public accountant and professor at Dillard University in New Orleans. She writes a personal finance blog at kemberley.com. Follow her on Twitter at @kemwashcpa.