How can some people have more than $1 million saved for retirement, while others have nothing at all put away for their Golden Years? Two words, retirement planning.
Retirement Planning to Succeed
Retirement – the thought can be both exciting and daunting. It’s exciting because you finally get the chance to get out and do what you want to do. It’s daunting because, without the right financial planning, you won’t have the money to do what you want. You might not even have enough to retire in the first place. How much do you need to save per month to make sure that you’re able to pay your bills once retirement rolls around?
How to Turn $100 per Month into a Large Retirement Account Nest Egg
Most of us can save $100 per month if we really put our minds to it. It might require some sacrifices – not buying that $7 cup of coffee every morning is a good start. Limit how often you eat out. Cut back on power consumption in the home. Don’t upgrade your electronic gadgets until they’re truly outdated or break down (no, you don’t need the new generation iPad if your last generation version is working just fine). Instead of frittering away your funds on inconsequential things, save them.
It’s also important that you start saving early. Begin by age 25 and invest at least $100 per month in an interest-yielding financial vehicle, and you should have $1 million by the time you retire. Not only that, but you’ll have less to invest as time goes on, because your interest will be earning interest.
Make Use of Employer Matching in a 401k Retirement Plan
Employer matching on 401(k)s might not be as common as it once was (some source state that up to 40% of employers no longer match contributions), but it’s still a powerful financial tool if available. Even if your employer doesn’t match your contributions dollar for dollar, that’s still free money they’re offering you. Take advantage of it and combine it with your $100 per month (if they match 100%, you’re now investing $200 per month). As a note, pay close attention to the vesting plan put in place by your employer. Leaving before you’re fully invested could cost you a lot in lost contribution matches.
Pay Attention to Investment Costs in your IRA Account
Investments come at a cost. To make your $100 per month stretch further, make sure you’re opting for low-cost investments. Even your 401(k) plan comes with fees, which eat into your savings. Make sure your 401(k) program has fees and expenses that come to no more than .5%. Even 1.5% can cost you thousands of dollars extra per year and increase the length of time you have to save before you build a decent nest egg.
When it comes down to it, saving $100 per month toward retirement really isn’t that much. It’s $25 per week – you can make that up in reducing your daily costs very easily. If you’re smart and make use of the tools available, you can turn that small $100 per month contribution into more than $1 million by the time you retire.