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How to Save For Retirement: 5 Must Follow Tips

Last week was save for retirement week. Who knew? Seriously though, saving for retirement is an important matter that takes time and discipline to achieve.

If you want to know how to save for retirement but don’t know where to start it can be overwhelming. I know saving for retirement is a challenge when it’s 3-4 decades away, you have little money to invest or you simply don’t know how to invest in the stock market.

I saw people deal with all of those issues when I was a stockbroker. I’ve also dealt with them myself in a previous life. Whatever the situation is, don’t allow them to hold you back from saving for retirement. If you want to know how to save for retirement, this post will arm you with the information you need to start saving for retirement.

Start With Your Job

 

The best way to save for retirement is through your current employer – IF they offer you a 401(k) plan. There are two simple reasons for this:

  • The money comes directly out of your paycheck so you don’t “feel” the money coming out
  • The potential for a 401(k) match – which is free money

I don’t know about you, but life is busy. This makes it easy to forget to do certain things and saving/investing is at the top of that list. A 401(k) plan is a great way to put saving for retirement on autopilot. You simply set it up to have a certain percentage out of each paycheck and they put it into your investments of choice. You don’t have to think about it, the automation does everything for you.

I love automation, but what I love even more is free money. Many employers will give you a 401(k) match for money you set aside for retirement. In many cases, it goes like this – you set aside six percent of your paycheck and they give you, for free, another three percent. Your plan may be a little different, but you get the point. Your employer gives you money, for free, to save for retirement.

If you leave your job, don’t worry. You can take the money you’ve contributed into your 401(k) plan and move it to your new employer. You can also leave it with your old employer or move it to an online brokerage for an IRA. In some instances you may even be able to take the money your employer put in your account.

How to Save for Retirement Without a 401(k) Plan

 

You know you need to save for retirement but what if your employer doesn’t offer a 401(k) plan? While over 80 percent of employers offer 401(k) plans, not everyone does. You may also have access to a 401(k) but the plan may not be very good. Both are unfortunate as I believe a 401(k) is one of the best tools available to help grow your money. Don’t fret as you still have retirement planning options. Here’s how to save for retirement without a 401(k) plan:

  • You open an IRA through a major online brokerage

It’s really that simple. If you don’t have a 401(k) plan you need to find a way to save for retirement and that can be done through an online broker when you open an Individual Retirement Account (IRA). An online broker allows you to invest in virtually anything you want – stocks, mutual funds, Exchange-Traded Funds (ETFs) and more. Even if you don’t know how to invest in the stock market you can still do quite well through an online broker.

There are many online brokerages available. I’ve reviewed some of the best online brokerages here though that can still be overwhelming. Below are some of the best brokers to use for your retirement planning:

  • Betterment: Betterment is a robo-advisor, which means they manage the entire investing process for you. You answer a few simple questions and they custom make a portfolio for you. The best part – Betterment has no minimum balance requirement. You can open an account with as little as you want.
  • Wealthfront: Wealthfront is a lot like Betterment, though a little better in my opinion. Also a robo-advisor, Wealthfront manages everything for you and they provide a little better diversification than does Betterment. You can open an account with Wealthfront for as little as $500.
  • Motif Investing: Motif Investing is a really unique online broker. You can either invest in a “motif” which is a bucket of 30 stocks or ETFs or invest in individual stocks. If you want to go with the former you can either make your own bucket or choose one from their pre-made list of 150. You can open an IRA with Motif Investing for as little as $250.
  • Scottrade: Scottrade is the most traditional online broker of the list and one for more self-directed investors. Scottrade has been around for over 30 years and offers many tools to help you save for retirement from over 14,000 mutual funds, $7 stock trades and over 500 local branches throughout the country. You can open an IRA with Scottrade for as little as $500.

Saving for retirement without a 401(k) plan can be difficult though it’s certainly not impossible. If you do choose to open an IRA you can save up to $5,500 each year for your future retirement needs.

Know Your Goals

 

I’ve been asked how to save for retirement many times. Regardless of where you’re at in your investing knowledge I commonly ask about goals. Your goals will dictate how you save for retirement. They will guide your decisions, your investments and much more.

Let’s face it, we’re all different. You may want to pursue a traditional retirement. You may want to retire early. You may want to start a business in retirement. All of those will impact how and what you should invest in. Regardless of which route you decide to take you need to personalize your retirement planning to that to ensure success.

Avoid Debt

 

I know debt seems odd in a talk of how to save for retirement. It’s really not and that’s for one simple reason – the more debt you have the less you’ll be able to save and invest. Debt obligates you to someone/something else and restricts your freedom.

Too often, and I’ve been guilty of this myself in the past, I’ve seen people unable to save much for retirement and it almost always came down to one thing – they had too much debt.

If you have a lot of debt, or simply need ways to save money on regular expenses (so you can invest), check out some of the following ways to help yourself out:

  • Get rid of the high priced cell phone contract. You don’t need to spend $100+ per month on a cell plan. There are many cheap cell phone plans available that can save you significant money each month. You can get a plan for as little as $10 per month with Republic Wireless or $35 per month with Straight Talk.
  • Lower your debt payments. If you have a lot of consumer debt or student loans you can consolidate or refinance it to save money. There are many options available though Lightstream and Lending Club are great for consumer debt and LendKey is great for student loans.
  • Don’t eat out as much. The average person spends $225 per month eating out. If you cut that in half, you’ll have $1,350 to save for retirement in a year.

There are many other simple ways to save money every month, but this should help you start saving money that can immediately be used for retirement planning.

Use Time to Your Advantage

 

When many ask how to save for retirement they don’t realize how important time is in that question. We think it’s impossible to invest in the stock market with little money and choose not to start. Don’t give into the myth you need a lot of money to start saving for retirement. You don’t, you simply need to start.

The reason is simple – time is your best friend when investing in the stock market. Even if it’s $50 or $100 a month, time will grow that money and cause it to make more money. It just builds on itself from there, but if you wait you lose out on all of that growth.

Time also does something else with your retirement planning. As the stock market goes up and down some of your investments will do great and others not so great. You want to check in on your investments regularly. It doesn’t have to be on a specific interval, but you do want to check in on your investments. Many experts suggest to check in on your investments at least once per year. I usually recommend at least twice per year. Find what works for you and run with it.

We’re not done with time and investing. The final aspect is your knowledge level. Education breeds confidence. That confidence gives birth to comfort. This will help your retirement planning efforts. You may not know much about investing in the stock market, and that’s ok.

Don’t think you can’t or shouldn’t invest as a result. There are many ways to learn how to invest – from resources available online to free classes offered through an online broker. You don’t need to be an expert to invest, you simply need to have a little knowledge and a willingness to start sooner rather than later.

 

When did you start saving for retirement? Why is it so important to know how to save for retirement? How often do you check in on your investments?

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I'm the founder of Frugal Rules, a Dad, husband and veteran of the financial services industry. I'm passionate about helping people learn from my mistakes so that they can enjoy the freedom that comes from living frugally. I'm also a freelance writer, and regularly contribute to GoBankingRates, Investopedia, Lending Tree and more. If you're wanting to learn how to monetize your blog, check out my blog coaching services to see how I can help you take your site to the next level.

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33 Comments

  • Nice infographic! For me, I’m just trying to get started. When you’re in your 20s it’s hard to think that far down the road.

  • Love the infographic! We are in primetime retirement saving mode right now. Whle we are investing, we are also saving in other ways, like real estate.

    BTW – We’d love to publish and nice infographic. How did you find that one?

    • John says:

      Thanks Greg. Great point, it can also be a great time to look at how you can diversify your saving/investing.

      I use http://visual.ly/ for my infographics. It’s totally free and they have a lot you can just pick from. You just put what you’re looking for in the search field and it brings up what they have. You can also input your own info to create on of your own. I have not gone that route yet, but do plan on it.

  • justin@thefrugalpath says:

    Nice post. That infographic says it all. Sadly most people never get to plant that little seed to see their retirement investments blossom. I’m glad we started putting money into my wife’s 401k early. Wish we would have done more, but we’re going to ratchet it up this year.

    • John says:

      Thanks Justin. We’re in the same boat, but that can be changed. It’s important to learn from past mistakes and make impactful changes based off of what you’ve learned.

  • Michelle says:

    Definitely start early! Even A little bit can add up to a lot in the end.

  • Liquid says:

    Great suggestions and nice color scheme on the infographic. Starting early and continuing to make investments a priority is key to taking advantage of the power of compounding. IRAs are useful tools, my favorite one is the Roth IRA 😀

  • Money Beagle says:

    Saving for retirement is not only your retirement accounts, but also making sure your entire set of financial goals is accounted for when that time comes. For example, one of my goals is old-fashioned in that I do not want the mortgage or any debt to be in place when I retire, so this is a number that I take into account on top of the IRA and 401(k) numbers.

    • John says:

      Great point! I completely agree. I think retirement saving/investing requires a more holistic approach than just simply retirement accounts.

  • great infographic. I love the images that depict all of the steps.

  • Jason says:

    Great infograph! Roth IRAs and employer-sponsored plans are great vehicles to save for retirement. With most retired people that I speak with, the majority of them often say that they wished they would have started saving earlier and invested more throughout their lives. I hope the younger generations can learn from the mistakes of their parents and grandparents…time will tell!

    • John says:

      Thanks. I’ve seen the same thing as well. I have been encouraging my younger brother, who graduated college two years ago, to start putting money into a Roth now to get in that habit of saving money and getting it started sooner rather than later.

  • Veronica Hill says:

    Nice and simple, I like it! I need more income to save more 🙁 C’mon darn website, make me money! Hmmm maybe I should get back into web property investments so I can reinvest that into a ROTH

  • AverageJoe says:

    Great analogy…..growing your savings. Cool.

  • Cat says:

    That’s a great graphic – easy to follow and to the point. And of course you didn’t get a card for anyone – you were saving that money for your retirement! 🙂

  • Pauline says:

    Nice infographic, easy and simple! I am totally hands on with my retirement, basically considering that any money “left for later” is a day less that I will have to work in my life!

  • I love the little pictures. Doesn’t look scary at all. Maybe that should be what you get to sign up for a 401K instead of a book of big words and funds that intimidate most people.

  • John says:

    That’s a great idea Kim! I totally agree.

  • Hey John,
    We save for retirement through many different plans and through work. I have no idea how much money we are aiming for to be honest. Now that we have the cash to pay our house off we can start saving more money again. While we still have renovations to do in the house we will have more money to dedicate to retirement savings and catching up with the RRSP room that we have available. So much to do and think about and we are still young. I wonder if life does get easier and when… maybe we just make it harder than it seems, who knows. Great infographic… Cheers Mr.CBB

    • John says:

      That’s awesome Mr. CBB. I think saving for retirement is best served by attacking it from various angles to set yourself up best for it. I hope it gets easier, but I think a lot of it is what you make of it.

  • CF says:

    Cute infographic! I wish I had started saving aggressively for retirement earlier.

  • I’m certainly guilty of not saving as much as I know would be optimal at my age, however, I do have several retirement investment vehicles at my disposal. Plus my employer puts 10% of my salary into a pension for me, to which I contribute another 6%. Overall, I probably contribute around 8% of my annual salary to my retirement.

  • A very belated thank you for the link back to my post. I’m pretty sure there are no Hallmark cards for National Save for Retirement Week, but it is one of the more intelligent things to have come out of Congress. Love the info graphic one of the best I’ve seen.

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