We live in a culture of “now.” We crave instant gratification; it’s why we can get instant quotes for auto insurance, next day shipping and Netflix streamed right to our computer or TV. However, one of the most common fears of those nearing retirement is outliving their money, so saving money is of the utmost importance.
Unfortunately, our need for immediacy can make saving money difficult. There are so many things we would rather do with that money: buy a car, buy an iPad, go on vacation. But saving money is an important life skill, one of those rare things that’s just as important at age 5 as it is at age 55.
And it pays to start saving early. For example: by putting $150 a month into an IRA that earns 8 percent starting at age 25, you’ll have over $500,000 by age 65. Waiting only 5 years will net you over $180,000 less.
So, when and how should you be saving? Everyone’s situation is a little bit different, but here are some general tips for different periods of your life:
- 20s- after establishing an income and emergency fund, start putting money into a 401(k) through your work if it’s available. You can also open an IRA at Iowa State Bank.
- 30s- increase your 401(k) contribution so that you’re getting the maximum company match if possible; open an IRA with Iowa State Bank if you can save more money; invest diversely.
- 40s- continue with maximum 401(k) and IRA contributions if possible; seek advice from a financial planner or investment professional to make sure you’re getting the most out of your investments.
- 50s- you can make catch-up contributions on a 401(k), up to $5,500 a year once you turn 50; consolidate any old 401(k)s or IRAs into one manageable account; make a plan for Social Security- you can begin taking benefits at 62, but postponing that means larger payouts.
Unfortunately, there’s not a lot that can be done to catch up for lost time when it comes to saving, so make sure you have a plan in place. The staff at Iowa State Bank can help you with any IRA, CD or CDARS-related questions you may have, so start saving today!