Some of you may be asking yourself, "Why in the heck is she worried about saving for retirement?" If there is one thing I learned in this life, it's that saving early not only prepares you for tomorrow, but it also gives you peace of mind. Ever since I was 18, I have been saving money for retirement via an IRA or some other deferred tax retirement account. In the beginning, I would only save $25 or so, but the joy I received when checking that account and seeing that I had money saved for retirement was the best feeling ever. Why did it feel so good? Because I knew deep down inside that my future would be secure by taking small steps now so that it would be easier later.
Recently, I have been debating on how much to save for retirement. I know by saving anything at all, even 4%, I am saving more than the average American. I have decided I don't want to be the average American; I don't want to be dependent on social security, or family, or be struggling when I am 60. So I decided to reevaluate my retirement savings percentage.
Previously, we (my husband & myself) were saving 9% of our gross pay, but I want to increase that amount. I know many of you are thinking, "9% is a lot, I don't know if I can even save 1%," but trust me is easier than you think. Saving for retirement is just like saving for anything else: start slow, live
below your means (i.e. don't go buy a big fancy car or flat screen TV, when you have no savings and can't buy milk), and cut expenses/debt. If you need inspiration or guidance on how to do things like this, then I highly recommend,
Total Money Makeover by Dave Ramsey. In his book you will learn how to follow his "baby steps" to financial freedom and let me tell you it actually works. You can't comprehend how easy it is to save for things like retirement when you do not have debt.
After deciding to increase our retirement savings, I sat down and ran the numbers on how much it would cost us monthly. This can be hard to do because our retirement savings is tax deferred and deducted from our paycheck prior to actually receiving our paycheck. What this means is that I might decided to have an extra $50 deducted for retirement, but since it is deducted prior to taxes being calculated, my paycheck may only be $40 less than previously because of being in a lower tax bracket. This scenario is just a hypothetical, but the logic behind is true and you can't beat that; being able to save $50, but your take home pay is only $40 less.
As you can imagine, I was running numbers for about an hour. I decided that in my calculations I would leave out any possible tax savings, because of how hard they are to calculate and if any tax savings happened then that would be a nice little gift to our paychecks. So I went back and forth for what seemed like forever, trying to decide between 11%-13% of our gross pay for retirement. Being a military family, I want to have money in the bank that I can access at any time, especially ever 3 years when we have to move; so I was torn as to how much we should contribute. On one hand I liked the idea of saving more for retirement, but on the other I liked the idea of having money for a rainy day (or in my case, moving day). Then, that's when it hit me; I had a revelation:
"Whether I save money for retirement or for a rainy day, it's still my money. The money will still be there, it will just be in another account."Once I realized that when I increase my retirement savings I still have the money, the idea of saving more didn't seem so bad. In my head, I had been treating it like I was never going to see that money ever again, but that's just not true. It's still my money, just in a different location. I will hopefully access it starting at retirement, but if I need it sooner I can borrow against it or simply withdraw it. Furthermore, I don't know why I was worried about a "rainy day" because that is why I have an emergency fund set up. With this realization, it was very easy for me to decide to save 13% for retirement and I am sure that I made the right decision.
Again, some of you may be thinking, "That's well and good for her, but I can't do that," but the truth is you can. With time and compound interest on your side, saving the smallest amount will help you. Remember, as David Bach states in his book
The Automatic Millionaire, "Some money is better than no money."
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So, everyone knows I love finding new ways to save money, be frugal, and all the while still have fun and live life. Well, what you may not know is that I am also very interested in saving for retirement. I personally believe that if we all began to save money young, then we wouldn't have to be so dependent on the government for things like social security, etc. Now, I'm not saying these programs are bad, I'm just trying to look out for numero uno here. So my husband and I contribute monthly to a retirement plan (despite the fact that interest rates are horrible right now) because saving some money is better than not saving any at all. In fact, we contribute to a retirement plan (TSP) and we also make monthly deposits into what I call our "early retirement plan." You see, I would like for us to be able to retire when we are 50 (or there abouts, God willing) so we will need money that we can access penalty free for this early retirement. Now, I know that we may not be saving enough, but we save what we can & every penny counts, right?
