Looking Ahead
Retirement and Emergencies Come First
While it’s tempting to start socking away for your child’s college education the second the strip turns pink, that’s not always the best idea. “Saving for retirement and an emergency fund need to be your highest priorities,” says Christine Fahlund, senior financial planner with T. Rowe Price. After all, when push comes to shove you can always take out loans to put your child through college … the same can’t be said of your retirement.
Start Small
Even a small amount, like $20 or $30 a month, is a good way to ease into investing without feeling like it’s putting too much pressure on your family expenses. “Once you’ve become comfortable with that amount, increase it,” says Lori Mackey, founder and CEO of Prosperity4Kids, Inc. “It will become a habit that is essential to your well-being.”
It’s Never Too Late
If you never really thought of retirement before you had a family, don’t feel discouraged—it’s never too late to start saving. “Each decade [of saving] makes a difference,” says Fahlund. While it’s true that the earlier you start saving the better, don’t let that be an excuse to not start funding your future as soon as you can. “Put time on your side for your retirement savings to compound as soon as you can,” Fahlund recommends.
Have a Plan
Speak to your financial adviser to get a feel for how much you think you’ll actually need to retire comfortably. Having a goal will help you feel like you’re accomplishing something realistic every time you put money into your retirement, instead of just blindly saving. If you don’t have an adviser, many online calculators (like this one from Mass Mutual) can help you figure it out. According to Fahlund, T. Rowe Price recommends saving at least 15 percent of your salary each year, including any employer match. “If you can’t get to 15 percent yet, consider increasing your contribution amount by 1 or 2 percentage points,” she says. “You’ll get there!"
Use Every Tool at Your Disposal
If you’re a stay-at-home parent or if you’re working part-time (or if your company simply doesn’t offer a 401k plan), that’s not an excuse to not save for retirement. Consider saving in a Roth 401k (check out the difference between a 401k and a Roth 401k here) or an IRA, instead. As an added bonus, these types of accounts can offer significant tax breaks later, says Fahlund.
Reinvest in Yourself
Whenever you save money by getting a discount, coupon or something on sale, take that difference and invest it, suggests Mackey. This is an easy way to amp up your retirement savings, and you’ll feel twice as proud when you score that great deal.
