When it comes to saving for retirement, you can definitely start small and think big. In fact, this is your best bet. When you’re younger, you may not have as much extra income to save for retirement, and your workplace may not offer a 401(k) plan for you to contribute towards. However, this doesn’t mean that you shouldn’t save at all. Even small regular deposits into a retirement account now can result in big savings by the time you retire.
One of the most important things you can do when saving for retirement is to start saving early, even if it isn’t much at first. Eventually, when your income increases, you can increase your contributions. Doing so will help ensure that you can afford a comfortable standard of living in your golden years.
Slow and steady wins the race when it comes to retirement, so use an auto savings program when saving for retirement. Here’s why.
Make Saving Part of Your Routine
With family responsibilities, work responsibilities, deadlines, crises, and everything else taking up the majority of your time, effort, and thoughts, it can be difficult to save for retirement consistently. Who has the time, really? When you’re young, your retirement isn’t your top priority.
Using an auto savings program can help make saving part of your routine. You only have to set up the weekly, monthly, or bi-monthly transactions once, and then you don’t have to think about it much again. The funds will automatically be transferred from your bank account to your retirement account on a pre-determined date and then invested in a mutual fund.
According to a New York Life survey, nearly two thirds of pre-retirees state a high level of confidence in their retirement savings when they use auto savings programs. Not only will you be able to save for retirement regularly without having to remember to do so, but you’ll also gain the peace of mind that comes with it.
Enjoy the Power of Compound Interest
More importantly, however, is that when you use auto savings programs when saving for retirement, you can enjoy the power of compound interest. Even small monthly contributions to your savings account can lead to an accumulation of funds in the hundreds of thousands of dollars range down the line. That’s because, over the long-term, you will be able to make more money on your money. Your savings will grow in the market and then that growth will grow on top of last year’s growth, and so on and so forth. Compound growth over 30 or 40 years of contributions will allow you to retire with a lot more money than you actually saved. You end up using your money as an income-generating tool, so you can get more, with less.
You’ll also benefit from compound growth through tax deferrals. The money that is placed in retirement accounts is tax deferred, which means you don’t pay the taxes until you retire. So all of that additional tax money that would have gone to the IRS over the years gets to stay in your account and grow.
The sooner you start using an auto savings program, the more you’ll be able to accelerate the income potential of your initial investment.
Using an auto savings program when saving for retirement can allow you to put money aside for your golden years regularly and consistently. This significantly increases the chances that you will be able to retire at your goal age.
Saving inconsistently is one of the worst retirement mistakes you could make. Using an auto savings program is your best bet for peace of mind, to allow your money to grow, and to increase the odds that you’ll be able to retire when you want to.