Finance

How I Started Saving for Retirement

This is a sponsored post for SheSpeaks/Prudential.

Confession: I am 36-years-old and this is only my third year saving for retirement. Now that I’m a mom, wife, and homeowner, I wish I could sit down with my 22-year-old self and tell her to start putting something (literally anything) away for the future. This post is for those of you who have yet to start saving because you think it’s too early, keep putting it off, or don’t think you can afford to do it. I get it. I’ve been there.

But it’s never too early, it’s time to start now, and even if money is tight, there are ways to find even a little bit to put away each month. The sooner you start saving, the more time your money has to grow. Even if you can’t afford to put very much away, something is so much better than nothing.

When Prudential asked me to join their mission to help women have protected lifetime income, I jumped at the chance to bring awareness to something that I wish was on my radar over a decade ago. Last week, I had the opportunity to speak on a panel with a Shirley Ann Robertson, a Prudential Financial Professional who shared some insight on the best ways to save. Today, I’m excited to partner with Prudential to talk about the importance of protected lifetime income.

How to Save

This goes beyond putting money into a retirement account. Shirley Ann talked about setting up a few different funds, so I’ll share her tips and what I’m doing as well.

  1. A savings/emergency fund. This is the pot of money you’ll have aside from what is in your retirement account. Should you choose to put your money in a 401(k) or in a IRA (I’ll talk about those in a minute) you’ll still likely want to have some other funds put aside.
  2. Retirement fund. This is your 401(k) or IRA. Shirley Ann recommends an automatic monthly contribution.
  3. Large purchases (think home/car) fund. Pretty self-explanatory.

I have one savings/emergency/large purchases fund, or just one savings account. This works for me because I can see everything in one place, although now I’m thinking about splitting things up and setting goals for each one.

Conor and I are currently saving to buy our first investment property in the next year or two – ideally, a 2 or 3 flat that we’ll rent out. Investing in real estate is a big part of our long-term savings plan since it will mean having someone else (a renter) pay the mortgage (with their monthly rent) on a building we own. This building will be a long-term investment that we’ll hold on to until it’s paid off in-full, and we’ll then sell the building or continue to rent it out and put money away each month.

I know this sounds overwhelming. I didn’t think I could afford to save in my 20s and I definitely couldn’t afford to put away what I’m putting away now when I was just getting started. Looking back at what Shirley Ann called my “latte factor” for some of us, there’s at least a little something we could save. Skip that coffee or night out once a week and roll those savings into your retirement and savings plans, then increase the percentage of what you put away each year.

Retirement Goals

Have you ever thought about what you want your retirement to look like? Now that I’ve had the chance to really think about it, I hope we’ll have a little house or condo (that we own–no mortgage would be the goal!), hopefully traveling as often as we’re able, and spending time with family and friends. The biggest unknown is the age I’ll be when I retire, and how much money I’ll need. My grandparents died in their 80s but my great aunt is almost 101, so the thought of planning on having enough money for an unknown amount of time is a little overwhelming.

How to Save for Retirement

The two most common types of retirement accounts are IRAs and 401(k)s.

A 401(k) is a plan offered by your employer. If you work for yourself, move on to the SEP below. With a 401(k), you’ll get a tax break on any money you put away for retirement, and some employers will even match your contribution (yes, that’s free money). I’ve been working for myself since 2007 so I didn’t really miss out here, but if you work for a company that will match your contribution, you should really take advantage of that. Funds are drawn from your paycheck each month, which makes it really easy to save. I’d recommend working with a financial professional to determine how much to save, and how to invest those funds.

SEP (Simplified Employee Pension) are for those of you who like me, work for yourselves.

Once you open your account, choose from the investments that your account provider offers. I have a financial professional invests in mutual funds, stocks, and bonds.

Protected Lifetime Income & Why It’s Important

It is so important that women take retirement planning seriously because of the unique challenges we face. Women tend to make less money (on average), invest less, and work more as unpaid laborers at home. Women also live longer, and often live alone, so they need more money in retirement.  Protected lifetime income, in the form of an annuity, can help women ensure they have enough money to cover their expenses as long as they live.

Another confession: I did not know what an annuity was before this partnership. So let’s review, because while this isn’t something you’d put your 401K or SEP into, you should have this filed away for when you retire. An annuity is a long-term investment made with an insurance company, designed to provide income in retirement. The insurance company will provide you with income payments over a specific period of time (often for life) in exchange for a fee that allows them to protect and guarantee that income. Annuities contain exclusions, limitations, reductions of benefits and terms for keeping them in force. Talk to a financial professional to find out if they are the right product for you.

Looking at my great aunt Rose and how long she lived, this is definitely something I’ll consider when it’s time to retire to ensure I don’t outlive my retirement savings. 

In the past, many people had their pensions to count on for monthly retirement income, but because pensions are more rare and Social Security isn’t meant to be your sole source of income in retirement, an annuity can help to fill the gaps in your retirement funds. An annuity is an income stream (like a “paycheck”) for life that is protected.  

If you have questions about saving for retirement, a Prudential financial professional can help you by looking at your unique situation and providing a complimentary financial assessment. Click here to sign up to connect with a Prudential financial professional today.

Have you started saving for retirement?