When Should You Start Saving for Retirement?

by Patty Gallagher

Even if you love your job, you’re probably looking forward to the day you punch your last time card and can begin your retirement. But while you may have a 401K and social security coming your way, the bulk of your retirement stash may still fall on you and your ability to save.

With that said, when should you start saving for retirement?

It is never too soon.

Relying solely on a 401K or social security can be a risky bet. Your 401K is tied to the success of the stock market. Even if your 401K performs well for 30 years, a sudden economic downturn could erase your earnings just when you need them.

Social security, too, is growing increasingly uncertain. According to 2015 findings from the Social Security Administration (SSA), the ratio of workers to SSA beneficiaries is currently at a record low of 2.8. (By comparison, when social security was first rolled out, there were 41 workers supporting the program for every social security recipient.) As the baby boomer generation ages that number is anticipated to continue shrinking, raising questions about the long-term viability of the program as it currently exists.

Both of these pillars of retirement planning can be highly unpredictable. That’s why it is so important to begin planning your retirement savings early.

To ensure a long and happy retirement, here are the two easiest and most impactful things you can do:

Change your spending habits: Increasing your savings for retirement isn’t just about earning as much as you can during your working career. Making slight lifestyle adjustments to alter how you spend that money can have just as large an impact. What is that five-dollar specialty Starbucks drink you get every day worth to you? Over the course of a 40-year work history, it would add up to $73,000—more than enough for a down payment to help you move into a relaxing, beachfront condo.

Diversify your investments: While your 401K can be viewed as a risky investment, it is still a safe harbor for your savings as long as you have other types of investments for balance. Certificates of deposit, savings bonds, annuities and IRAs are other financial tools that can provide safekeeping for your savings. Or, if you’re handy enough to take care of your own repairs, real estate can also be a good place for your money. In an economic downturn, gold and silver prices typically do well by comparison, so having a small supply of precious metals might provide an additional safety net.

To learn more about how you can prepare for a prosperous retirement, stop by any office of The Milford Bank and speak with a financial expert.