Gen Xers and Boomers who want to be better prepared for retirement should take action today.
When it comes to retirement planning, few of us feel like we’re preparing as much as we should. In fact, a new survey from John Hancock found only 11 percent of respondents felt “very prepared” for their financial futures. The rest of us? Not so much.
Thankfully, for the 53 percent that only feel basically prepared – and worse, the 36 percent who don’t feel prepared at all – many Gen X and Baby Boomer survey respondents are at least taking action to get to a better financial place that promotes long term success.
In the past year…
- 47% have taken steps to reduce the amount of income spent on monthly bills
- 44% paid of debt, freeing up more cash for savings
- 30% made a budget, which helps improve cash flow and avoid reliance on credit
“Often retirement is one of those things that you hope will pan out, but you fail to plan for effectively,” says Gary Herman, President of Consolidated Credit. “The key to moving forward is to identify one step you can take today that would improve your financial situation for tomorrow.”
Identifying one step to take today
Essentially, the idea is that you need to start moving so you can gain momentum. If your long-term savings aren’t where they need to be because you’re not saving enough, then you need to take action to improve that now. If you have limited cash, it may take a few steps before you open your IRA or set up contributions through your employer’s 401(k) match program.
Still, taking the first step will get you started on the path to finally making progress on your retirement plan. With that in mind, Consolidated Credit offers three ways that you can take action today to improve your ability to save.
Idea No. 1: Eliminate one credit card bill to open an IRA
Credit cards are tricky debts to manage because the amount you owe varies based on how much you owe at any given time. If you’re having trouble saving for retirement, make plans to eliminate one credit card bill – ideally, you want to pick the one with the highest interest rate.
If you pay off the debt in large chunks and zero out the balance, then you can divert the money you save by eliminating that bill to make automatic contributions to an IRA.
Idea No. 2: Review employer’s match plan on your 401(k) and adjust your contributions
Many employers incentivize their employees’ contributions to a 401(k) program by offering to match 50% of your contributions up to a certain percentage of your salary. So, for instance, your employer may give you fifty cents for every $1 you contribute up to 6% of your annual salary.
If your employer has this type of program, review how much they offer and up to what percentage, then make sure your contributions get you the full amount matched. Otherwise, you’re leaving free retirement money on the table.
Idea No 3: Save a specific amount needed to open a CD
A Certificate of Deposit (CD) is considered a low-risk investment because the chances of having a loss are minimal. So if you’ve never invested because you’re not comfortable investing in high-risk options like stocks, then investing in something like a CD is a good way to get your foot in the door so your money grows more than it would in a basic savings account.
In most cases, you have to have a certain amount of money to deposit initially to open the CD – usually at least $1,000, although there are smaller 1-year CDs for as little as $500. Also, the longer you can leave the money in the CD, the better the APY (annual percentage yield).
With that in mind, streamline your budget to save up a certain amount of money every paycheck, once you hit that $500 or $1,000 threshold, shop for CD that fits your needs and invest your money to get your savings started towards healthy, longer-term growth.