It's hard to save money, especially if you're raising a family on anything less than the median household income, which according to the U.S. Census Bureau is $50,500 per year. The truth of the matter is that $50,000 doesn't go a long way in today's economy – not after taxes and Social Security are taken out, and then you face the costs of food, energy, housing, insurance, education and health care.
For many people, the only way to save money is to put the process on automatic pilot, so you don't have to think about it, and don't have to make the constant effort. Here are six ways to save for retirement, even if you're too lazy, intimidated or frazzled to do it on your own:
1. Sign up for a 401(k) plan at work. All it takes is a one-time visit to your human resources department, where you'll fill out a few forms. Your company will take the money out of your paycheck automatically, before you see it or have a chance to spend it. If your company matches 401(k) contributions, try your hardest to sign up for at least the amount the company will match. It's worth the current financial sacrifice to get that free money later on. Try to save as much as you can, but be realistic. You don't want to have to go back to human resources and admit you can't afford your contributions. Even if you save 2 percent of your salary, you're doing better than most. But try for 5 percent or more if you can afford it.
2. Put your tax refund into an IRA. If you don't work for a large company offering a 401(k) plan, saving gets more difficult. That'swhat an IRA is for. Set one up and try to fund it on a regular basis. But even if you do have a 401(k) account, there's no harm in also starting an IRA to give you an extra financial cushion in retirement. In addition to whatever regular funding you make, try this strategy: If you get a bonus, inheritance or tax refund from the IRS, spend half of it, then put the other half in your IRA for the rainy days of your retirement.
3. Invest in a low-cost index mutual fund. Unless you were a math major in college, or studied finance under someone like Warren Buffett, you have no business trying to invest your own money or pick winning stocks from the thousands of offerings on the stock exchanges. Besides, that's a lot of work. The lazy person's way to invest – whether in your 401(k) plan, IRA or any other savings vehicle – is to choose a broad-based index mutual fund with no up-front fee and low annual expenses (below 0.5 percent). The bonus: Low-cost index funds are not only the easiest investments, but they're usually the best.
4. Buy a house and pay your mortgage. Real estate got a bad name during the great recession, when some high-flying markets sank as much as 50 percent. But one temporary exception does not change decades of good results. A time-proven method for people to build capital is to buy a home, live in it for many years, pay your mortgage faithfully and then eventually sell it for a tax-advantaged profit.
5. Pay off your loans. A sure way to torpedo your retirement is to carry too much debt, which almost always costs more than what you can earn on your savings. Pay off credit card debt first, then any other consumer debt, including education loans, unless you have some kind of preferred rate (like a promotional auto loan) that only costs 1 percent or 2 percent a year. Finally, if all your other debts are paid, and your retirement plans are fully funded, you can start making extra payments to satisfy your mortgage early.
6. Hire an accountant to do your taxes. It kills me to say this, because I don't believe we should have to pay experts just to fulfill this mandatory duty of citizenship. But the fact is, for most people the world of finance has become so complicated that hiring someone to do your taxes will probably save you money in the long run. It will certainly save you the irritation of figuring out the tax forms, and might lower your stress levels to the point where you'll live long enough to enjoy the retirement savings you've been accumulating over the years.
Tom Sightings is a former publishing executive who was eased into early retirement in his mid-50s. He lives in the New York area and blogs at Sightings at 60, where he covers health, finance, retirement, and other concerns of baby boomers who realize that somehow they have grown up.
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