3 Retirement Savings Moves It Pays to Make ASAP

If you want to be prepared for retirement, you’re going to need to make smart financial choices throughout your life. The sooner you begin getting ready for your later years, the better your chances of ending up with the income you need as a retiree.

Not sure where to start, exactly? Here are three steps to take right away if you want to get on the path to a secure future.

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1. Set your savings goals

If you want to save up enough money to support yourself in retirement, you need to know how much “enough” is. That means you should set clear savings goals so you’ll know what you’re working toward. This sounds complicated, but there are actually a few very simple ways to determine how much to put aside for your future.

One of the easiest options is to simply estimate your final salary and multiply it by 10 to calculate the total amount you need saved. Your final salary is the amount you’ll be making when you stop work. You can get a rough idea of what amount it will be by taking your current salary and adding 2% to it each year on the assumption you’ll get regular salary bumps. If you determine your final salary will be around $50,000 per year, this would mean your savings goal should be to amass $500,000 by the time you’re ready to retire.

Of course, knowing the total amount to save is just a first step in determining your savings goals since you’ll be investing over time to amass your fortune. You can use the calculator at Investor.gov to figure out how much to invest each month to hit your final goal. For example, if you’ve determined you need $1.2 million, are 20 years out from retirement, have $20,000 saved already and are expecting 10% average annual returns, you could calculate that you must invest around $1,550 per month to hit your target.

2. Set up automatic contributions

To maximize the chances that you will succeed in saving enough for retirement, it’s a good idea to consider automating your investments ASAP.

This means you have the money withdrawn directly from your bank account on payday or taken out of your paycheck before you receive it and put into your IRA, 401(k), or other tax-advantaged investment account. By arranging for funds to be directed into your retirement savings effortlessly without your input, the money is all-but-guaranteed to get where it is supposed to. You won’t be able to choose to spend it on something else, since the money will be moved before you get a chance to use it.

3. Diversify your investment portfolio

Finally, once you’ve moved your money into a retirement account, you’ll want to be sure it is invested wisely. That’s because both the amount you invest and the performance of your investments will determine whether or not you end up with the nest egg you need for a comfortable retirement.

If you have the ability and your retirement account allows it, you can invest in a good mix of different stocks and bonds. If you don’t know how to pick individual companies to invest in, you can opt for exchange-traded funds (ETFs) that give you exposure to different types of assets. And if you want to be totally hands-off in your investing, you could choose a target- date fund that allocates your money to an appropriate investment mix given your age and risk tolerance.

By making these three moves ASAP, you should be able to set yourself on the path toward a secure retirement. The sooner you begin investing enough to hit your savings goal — and the more wisely you invest — the better off you’ll be in your later years.

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