Saving for retirement is something that can easily be put to one side as, for many, retirement is something that seems to be in the distant future and there are far more immediate things to be saving for such as home improvements, cars and holidays.
But it is important to plan properly for your retirement and make sure you do more than just put aside whatever money you have left at the end of the month.
So follow these 5 simple steps for retirement saving success.
Pay off your debts
It is vital that you pay off your debts before you start saving as the interest that you will pay on any loans or credit cards will far outweigh any interest that you will be able to make with a savings account.
Work out exactly how much you owe through loans, credit cards and overdrafts, you do not need to factor in mortgage repayments, and then try to calculate how long it will take to pay off these debts.
Once these have been paid off you can then start thinking seriously about saving.
Set up an investment plan
Unfortunately, there is more to saving for retirement than simply placing any spare money into a savings account and hoping for the best.
You need to shop around for the best product that will give you the best return on your investment and will allow for any fluctuations in the economy and will keep with any rises in inflation.
It is best to do some research around the types of financial products that are available, for instance, comparing products online and reading the financial pages of newspapers.
Once you have read around the subject you should then seek professional financial advice before deciding upon the best way to invest.
Take advantage of free money
Many companies offer employer-sponsored retirement plans, such as the 410(k) or 403(b), that essentially offer free money to employees that join in the scheme.
How these work is that employees contribute a set amount straight from their wages and this amount is matched, in most cases, by the employer. In other words, if you contribute $50 straight from your wages then your employer will match that $50 and you will have a savings pot of $100 per month.
In addition, these accounts have tax benefits and so any return on your investments will be tax free.
If you don’t have access to an employer-sponsored retirement plan then there are other financial products available that you can consider.
You could open an IRA, which is a flexible savings account that offers great tax benefits (in the UK these are known as a cash ISA and a stocks and shares ISA) or try investing in dividend stocks, bonds or Real Estate Investment Trusts (REITs).
Even if you are in an employer-sponsored retirement scheme then this is also worth considering as a back up plan. But you should always seek professional financial advice before committing your money to a savings scheme.
Whether you’re saving goals are long term, such as for your retirement, or short term, say saving for a new computer, then the one rule to remember is that you need to spend less than you earn.
You also need to make saving a way of life so that your instinct is to put away any extra money rather than spend it on an expensive treat.
This guest post is brought to you by Moneysupermarket.com.