As your family grows, it can get more and more difficult to save. Additional expenses pop up everywhere, and you have the increased costs of maintaining a bigger home and multiple cars. However, it’s incredibly important that you be putting away some money each month for your future, especially your retirement. Generous pensions and retirement health benefits are mainly a thing of the past, and Social Security will be under a tremendous strain with an aging Baby Boomer population, so funding your retirement will fall largely on your shoulders. Here are some tips on how to go about saving:
Get your employer match. You may have heard this before but your employer match is free money, no matter how little it is. Many companies offer a match for every dollar you put into your 401k so if you do nothing else, contribute up to the minimum match level (often three or six percent) to make sure you’re taking full advantage of your employer’s contributions.
Fund an IRA. After you’ve contributed up to the minimum on your 401k, you may want to funnel the rest of your retirement savings to your IRAs. You can open an IRA (Traditional or Roth) at a number of brokerage houses and these plans often give you more control over your investments than 401ks do. Also, if you or your spouse stays at home with the kids, you can contribute to a spousal IRA for that individual. Once you have contributed the maximum to your IRAs ($5,000 per person in 2012 if you are under 50), go back and up your contributions to your 401k as much as you can up to the maximum allowable amount ($17,000 in 2012 if you are under 50).
The benefit of compounding interest is huge, so if you have the funds now, save as much as you can because it means you’ll be able to cut back on saving later in life when expenses really start to add up. And, remember, your kids can take out student loans for college but you can’t borrow for your retirement!
The information in this article is provided for education and informational purposes only, without any express or implied warranty of any kind, including warranties of accuracy, completeness or fitness for any particular purpose. The information in this article is not intended to be and does not constitute financial or any other advice. The information in this article is general in nature and is not specific to you the user or anyone else.
Annie Idea is a freelance writer focused on how to live large on a little living. She writes financial savings tips for the short term loans company, QuickQuid, and enjoys taking any idea and making it easier or cheaper to complete.