At some point during your career, you’re going to ask yourself: “When can I retire?” And the truth is, it’s different for everyone, depending on when you start saving for retirement. As a rule of thumb, you should have at least eight times your ending salary saved for 25 years of retirement by the time you are ready to stop working. It will allow you some extra cushion in the case of emergencies, such as health problems or a recession.
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And while most people should start saving for retirement in their late 20s, don’t panic if you’ve started saving late or if you’ve had an unexpected financial disaster. If you’re struggling to find that extra cash, there is still a lot you can do.
Here are four guidelines you should follow when starting to save for retirement.
1. Start saving now. You need to being putting cash away for retirement as early as possible. The later you start, the less you’ll have to save. But if you get a late start, you can still put away more than usual in IRAs and 401(k)s. The Internal Revenue Service allows you to put more in these types of retirement accounts because it knows you’re in savings crunch time.
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2. Delay retirement if you need more time. If you continue to work for a few more years – even just one or two – you can save thousands of extra dollars toward retirement. You also may want to consider holding a part-time job during the early years of your retirement to keep a steady flow of funds coming into your accounts. By designating your part-time salary to go solely toward future retirement spending, you can ensure your retirement savings will stay plentiful throughout your relaxing years.
3. Consider waiting to start Social Security. Each year you hold off from starting to receive your Social Security benefit from age 62 to 70, your monthly check increases. For example, at age 62, you earn a $750 check, while if you start at age 70, you get $1,320 a month. If you can hold off, it will pay off in the long run.
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4. Downsize. While it may be hard to part with the family home where your children grew up, moving into a smaller space will help cut down on spending. If your children are out of the house, keep in mind you are paying extra in heating and air conditioning costs, as well as extra square footage that you don’t need anymore. If you downsize, you will be able to cut mortgage payments and put the extra money in your pocket towards vacations or save it in an emergency health care fund.
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