Retirement is alternately appealing and terrifying. The idea of finally being done with work is incredibly appealing. But the idea of actually planning for it can be very overwhelming. There is so much advice out there, and it’s hard to know what it all means.
I think what scares me the most is those calculators and websites that say “You need to have X amount saved for retirement.” They all give different numbers. Some tell me I need a million dollars. Some tell me I need two million dollars. How can there be a difference of an entire million dollars?
This week, my office offered what they were calling a “Mid-Career Retirement Planning Seminar.” I know that I’m not yet to the midway point in my career, but I decided to attend, just to see what I should be doing now and what I will need to be doing in the decades (yes, decades) until retirement.
I am definitely glad I attended. I’m in my late 30’s, but wasn’t the youngest in the room, and the instructor even commented to me and a similarly-aged coworker that we were at the perfect time to attend purely because we were at a point to receive the information but not be overwhelmed by it.
What Should I Be Doing Now?
The first and most obvious tip was that if your company offers a 401k match, do everything you can to contribute so that you’re getting the full match. Why? It’s literally free money. My company matches up to 5%. So the first thing I should be doing is putting 5% into my retirement plan.
Look at it this way. Let’s say my 5% is $500. My company then also puts in 5%, so I have $1000. But what if the market drops? If it drops so that I lose 25% of the money in my retirement account, now I only have $750. That seems pretty painful. Except wait, I only put in $500 myself. If I had put that into a savings account, I would only have $500, plus a tiny amount of interest. Even with a market drop, I’m still better off.
His other big tip was that remember that this is long term investing. If you’ve got 20+ years til retirement, don’t track the markets day to day. In fact, you benefit if the market drops, because as you invest, you get to buy low. Thankfully, he also supported the Lifecycle funds that are available in our retirement plan, which is where I have my retirement invested. A Lifecycle fund is one that adjusts as you get closer to the target date of retirement, going from more risk to less risk, attempting to ensure that you get the best returns over the life of your investment.
How Much Should I Put Away for Retirement?
Here’s where I get overwhelmed. Beyond the match, what should I be saving? And the answer seems to be “max it out.” In 2019, the maximum you can put into retirement is $19,000. I cannot do that. A lot of people can’t. So instead, what I should be doing is slowly creeping up my percentage. If I get a raise, I should increase my retirement percentage.
That is something I’ve not been doing. I’ve been taking the extra money from my raise and putting it towards savings and my house. I can’t say that I regret that decision, but the next raise I get, I am committing to putting towards retirement, and I also want to tighten my budget so I can bump up that number.
So When Is the Best Time to Start Planning?
Now. Start planning for retirement now. You don’t have to be incredibly focused. If you don’t have much to set aside, do what you can. If your company offers a match, but you can only afford to put in 1%, do it. Even 1% is going to add up. Put that money in now and let it grow.
No match? Still try to invest somewhere. If you don’t have a 401k plan at work, open a Roth IRA. Some retirement accounts (outside of employer funded accounts) require you to have a minimum amount to open, such as $500. Start setting aside money until you have the $500 to open an account. Even if you just do the bare minimum, you will be better off.
And if you’re further into your career and haven’t done anything yet, just start now. Don’t worry about what you’ve done in the past. Just start now, and do what you can. Don’t let it stress you out.
Retirement can be stressful. But do what you can to get your plans in place so that you will be able to enjoy a blissful retirement.
Megan is a 40-something government employee in the Washington, DC area. She got interested in Personal Finance when she got out of college and realized that her paycheck wasn’t going to go as far as she had hoped. Since starting this blog, she has managed to buy a house and make a solid start on her retirement goals, and hopes to help others do the same. Here is her story:
In 2007, I was a gainfully employed 20-something with no debt but not a lot of knowledge about personal finance. It was a co-worker’s comment about Roth IRAs that sent me to the internet, searching for information. It was then that I realized that I really didn’t know a whole lot about personal finance and that my current financial situation was due a lot to inherent frugal tendencies, generous family members, a fear of debt, and good luck. While that was working for me, clearly I needed a better plan.
While I had no debt, I was also pretty much living paycheck to paycheck and not worrying about going over budget (I say this as if I had a real budget) because I had an emergency fund set aside to cover any overages.
Except that’s not what an emergency fund is for.
So I did a lot of research, read a lot of blogs, and decided that I needed a plan. I needed to budget. I needed to know what I was spending my money on. I needed to prepare for the future.
I decided to create a blog not only to make myself accountable to others but also to share the knowledge that I gained along the way. I’ve learned so much from my fellow bloggers, and I hope that my readers can find something useful in what I have to share as well.