Many financial experts advise that by age 40, you should have twice your annual salary saved for retirement. There are good reasons for this number, but for many people it seems absurdly out of reach. Figuring out how to save money is a complicated topic. Retirement is expensive, and it can include significant medical costs. How to budget can be an even bigger challenge, especially in a troubled economy in which many people have lost their jobs or been forced to take pay cuts. The reality is that many individuals won’t save as much as advised, as quickly as advised. In fact, about 30% of U.S. households led by people age 45 and older claim to have no retirement savings at all.1 There’s a savings shortage in America, and at times, the gap between where one should be and where one actually is can seem enormous.
One thing to be aware of is that time is one of the most important pieces in your savings plan. Start now—and start small if you have to. But wherever you start, you will soon be watching your savings grow.
Know your budget
Draw up a realistic, detailed budget that tracks all money going in and coming out, including debt repayment. Discretionary income that’s not needed for expenses should go toward savings, but you can do more than that. Your goal should be to free up as much money as you can and begin funneling it into savings. Remember that any costs you don’t reduce now will likely have to be reduced in retirement, so every dollar saved now will be worth exponentially more by the time you retire.
Automate your savings
Once you’ve cut costs and figured out how much you can afford to save, set up automated contributions to your savings. It’s easier to build your savings when you don’t need to actively think about transferring the money every time you get a paycheck. There are also apps and digital products that help automate your savings across different accounts or by rounding up small amounts of money on purchases you make.
Consider a side gig
Not everyone can take on a second job. The demands of one job and running a household can be overwhelming, but if your lifestyle can accommodate a side gig, consider picking one up and devoting the proceeds exclusively to growing your savings. An extra paycheck will boost your savings faster than cutting corners on your expenses.
Talk to a qualified professional
Meet with a New York Life financial professional to discuss different approaches to long-term saving. This can include more than simply saving for retirement or saving for your children’s college. Your financial professional can also help you choose product solutions that meet your needs and protect your loved ones. For instance, a whole life insurance policy can provide insurance protection but also includes cash value accumulation that grows tax-deferred over time and can be accessed if your needs change.2
The most valuable gift you can receive from a New York Life financial professional is the confidence and knowledge you need to save. Rather than being discouraged by advice columns about aspirational retirement savings goals, figure out what will best enable you to build the financial future you want. Don’t feel defeated before you even get started, and know that you don’t have to do it on your own.
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2Accessing cash value reduces death benefit and available cash surrender value.