Financial Wellness 2021: 3 Steps To Saving More This Year
Let’s face it. With technology connecting us to anyone anywhere at any time, it can be challenging to carve out time for ourselves. This behavior can heavily impact how we save for our future financial goals like retirement. Getting a head start on retirement savings in January will increase your financial confidence and you’ll get all the feels because you’re doing something meaningful for yourself! Check out these easy 3 steps to get going:
Step 1: Review Your Lifestyle Guide aka Spending Plan
If you haven’t established a spending plan yet, check out my Lifestyle Guide. Having clarity on how much you’re spending and where you’re spending will open up your eyes and wallet. Determine how much you can set aside each month towards your retirement account. A golden rule is to save 15% of your pre-tax income towards retirement. Explore what you’re currently doing and make a note of how close or far away you are from the recommended 15% savings rate.
Step 2: Establish Or Re-Examine Your Retirement Account
There’s a wide variety of retirement plans out there so don’t let this turn into overwhelm. Here is a quick hierarchy of retirement accounts to consider:
If you work for an employer that offers a retirement plan this is a great place to start! Find out if they offer matching contributions, a Roth version and the investment options available. If there’s a matching program, contribute at least that amount but don’t stop there! Remember to aim for a savings rate of 15% of your income. The plan limits are $19,500 in 2021 plus a $6,500 catch up contribution if you’re older than age 50.
IRA’s offer low costs, flexibility and a Roth (after-tax) option. The IRA contribution limit is $6,000 plus $1,000 if you’re older than age 50 in 2021. There are eligibility requirements for these accounts so check out the most up to date information on the IRS’s website here.
If you’re self employed or a small business you have a variety of options depending on the number of employees, net revenue, etc. Work with your CPA on your best options but there’s a lot of flexibility here that you can often use in addition to an Individual Retirement Account.
Step 3: Automate
This is the finish line! Set up automatic contributions directly from your paycheck or from your checking account so you can put this on the back burner. Set aside 15 minutes to set this up and it’s off your plate! Check out the next two pay cycles to make sure you’re changes have been made, that’s it! You're done!
I recommend setting up a recurring reminder every 3 months to see if you can increase your contributions at all. No amount is too small and this keeps saving top of mind rather than looking at it in December. You’re moving to be proactive with your retirement savings!