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Retirement Planning: It’s never too early to start.

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The sooner you start saving, the easier it will be to hit—and even exceed—your goals for retirement.

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The most common goal people are planning for on the Range platform is for their retirement. People know that this is important, and often have programs through their employer to start saving. Even though people know this, according to The Fed, in 2022 only 31% of people believed they were on track with their retirement planning.

That’s not a lot of people. We’re here to help with that. Let’s start with the why.

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Why should I start saving for retirement?

‍Aside from wanting to play a lot of golf or rollerblade, there are some legit reasons to start saving for retirement at an early age.

  • Social Security will not be enough to live on. Sadly, Social Security—the government program that provides benefits to retirees—is not designed to be your sole source of income in retirement. So you’ll need to save additional money to supplement those benefits. Or eat ramen for the last 20+ years of your life.
  • You’ll live longer than you think. Hopefully. The average life expectancy in the United States is now over 78 years old. So if you want to retire at 65 - you’ll need at least enough runway for 13 years, and likely much longer.
  • Healthcare costs are rising. Healthcare costs are rising faster than inflation. And as you get older, guess what happens? Your body breaks down. So you may need a significant amount of money to cover the costs of oldness.

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When should you start saving?

Right. Now. If you’re not already, it’s probably time to start. Even if it’s just a little each month. The earlier you start saving, the more time your money has to grow. You can thank compound interest for that. Compound interest means each year, you earn money not only on your principle, but the other interest you’ve earned.

For instance, if you have $10,000 saved at a 5% interest rate, this year you’ll earn $500. But NEXT year, you’ll earn 5% of $10,500. Each year that grows. The longer your money is invested, the more compound interest you earn. So get started early.

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When saving for retirement, there are a few important factors to consider:

  • Your age. As mentioned above, the earlier you start saving, the more time your money has to grow. With compound interest, even small amounts of money can add up to a significant nest egg over time.
  • Your income. How much you can afford to save will depend on your income and expenses. If you're living paycheck to paycheck, it may be difficult to save much money. But even if you can only save a small amount each month, it's better than nothing. As your income increases, you can also increase the amount you save over time.
  • Your risk tolerance. If you're young, you might have a long time to save. This means you may be able to invest in riskier assets with the potential for higher returns.
  • When do you want to retire? Some people want to retire early—which means they take a much more aggressive approach to their savings plan. The average age of retirement in the US is 62, and Medicaid (government provided health benefits) doesn’t kick in until 65.
  • Your target lifestyle. Do you want to stay in your current house? Live on a boat? Visit your grandkids in Spain for six months each year? There are lots of considerations that will shape your average yearly need—which in turn informs how much you need to save.

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Once you figure out your retirement target goals, there are a number of common retirement savings methods available for you to take advantage of:

  • Employer-sponsored retirement plans. Many employers offer retirement plans, such as 401(k)s and 403(b)s. These plans offer a number of advantages, including tax breaks and matching contributions from your employer. If your employer offers this, you should probably be taking advantage.
  • Individual Retirement Accounts (IRAs). IRAs are available to anyone with earned income, regardless of whether your employer offers a retirement plan. IRAs also offer tax breaks, but there are some income limits that apply.
  • Annuities. You can purchase annuities from an insurance comapny - for which they will guarantee a stream of income in retirement. Annuities can be complex, so make sure you understand the terms, or talk to your advisor before purchasing one.

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Getting started with retirement savings.

As we stated before, it’s NEVER too early to start saving for your retirement. Here are three things you can do to get a head start.

  1. Create a budget. This will help you to track your income and expenses and see where you can cut back on spending. See our cash flow page for more detail here.
  2. Set financial goals. How much money do you need to save for retirement? Once you know how much money you need to save, you can start to develop a plan to reach your goals. Your Range advisors can help with this (it’s what we do).
  3. Automate your savings. Set up automatic transfers from your checking account to your savings and investment accounts. Eventually you won’t even notice.

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Whether you’re looking to sail around the world or settle down in the country side, retirement is what we work our whole lives for. It’s well worth the time, effort and investment to get started early, so you can relax later. Like really relax.

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MORE:

https://www.range.com/services/retirement

What does F.I.R.E. mean for your retirement?

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Sources

https://money.usnews.com/money/retirement/aging/articles/what-is-the-average-retirement-age

https://www.federalreserve.gov/publications/2023-economic-well-being-of-us-households-in-2022-retirement-investments.htm

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