Basic Financial Rules For Retirement Saving
One of the most frequently asked financial questions today is “what is the best way to save for retirement?” Different experts have different opinions on what different individuals should do in their specific financial situation but there are a few financial rules that they agree on and recommend that everyone should use. Here are the rules of thumb to follow when it comes to retirement saving.
The 10%-15%-20% Rule Of Saving
When discussing retirement savings, it is recommended that you save 10% of your earnings if you plan on downgrading your way of life, save 15% of your income if you plan on maintaining your current lifestyle, and save 20% of your income if you plan on living the high life or retiring early. The calculations for this rule should include employer contributions as well as your individual contribution.
This rule generally applies to individuals that begin saving for retirement in their early thirties or before. Individuals that begin saving for retirement at an older age will need to increase the percentage that they are contributing to match the same value at the typical retirement age. If saving for retirement does not begin until after the person’s 40th birthday, then each percentage will need to increase by 5% to match the same level of comfort.
The Non-Access Rule
The easiest way to get your retirement account to grow is to place it off limits for any spending other than retirement spending. There are very few good reasons for borrowing against a retirement account and no good reasons at all for cashing out the account before you have retired, so it is best to be firmly in the mindset that retirement savings are for retirement only and will not be used for any other purchase. This guarantees that you will have the money available when you need it after you have retired.
If you are looking for additional money to pay off debts or to purchase a home, there are many ways to accomplish this without borrowing against or tapping into your retirement account. Many people choose to work additional hours or obtain a part time job to earn extra money that can be used to pay down debts. Other individuals choose to reduce their spending in other areas and apply those savings to paying down their other financial obligations. There are a number of different methods available for obtaining additional cash without touching the money you have saved for retirement.
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