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"The future ain’t what it used to be." Yogi Berra, the famed Yankees catcher, wasn’t talking about saving for retirement, but his statement makes sense in that context: Your retirement won’t be what you thought it would be unless you put money aside now for your future. And there’s no time like the present to get started. Here are five tips to set your retirement savings on the right path in 2018:
Earmark your 2017 tax refund for your retirement savings account
After all, this is money you probably didn’t plan on having, so you won’t miss it. Instead, it could be the opening contribution to a new self-directed IRA. (Opening an account with Entrust is easy; it takes only 10 minutes online, so you’ll be saving time as well as money.) Think of it as giving your future self a valuable gift. You can also complete IRS Form 8888 to have your refund directly deposited to your IRA.
Invest in what you know
If you have an IRA with a bank or brokerage house, chances are that your investment options are limited (equities, bonds, mutual and exchange-traded funds). There are many more options—real estate and precious metals, to name just two. These investments may be more familiar to you and they also offer the opportunity to further diversify your portfolio, a move most financial planners advocate. Learn more about the value of self-directed IRAs and how they work and start investing in what you know.
Know how much you need to save every month
This starts with knowing how much money you will need to live comfortably once you’ve retired. Start by researching what your typical monthly budget will be in the location where you want to retire. Your budget should include fixed expenses (rent or mortgage, groceries, utilities, health care, insurance, taxes) and discretionary expenses (travel, going out for meals or movies, mani/pedis, clothing, and gifts).
Demographics indicate that most Americans will spend 22 years being retired, and many sources suggest your retirement nest egg should be $1 million. Here’s a look at how long that nest egg will last in all 50 states. (Spoiler alert: Mississippi and Hawaii bookend the results.)
Once you have that big number in mind, you can calculate what you’ll need to put away every year to achieve that. That figure is called your savings rate. Even if you don’t reach that goal every month, having an actionable goal helps most people stay on track—just like an intention to clean out one drawer a week will lead to your whole house being better organized by December.
Find an accountability partner
Just like having a gym buddy helps you show up for your weekly Zumba class or your Tuesday morning run, having someone you’ve given permission to check in with you on your retirement savings can create accountability. This doesn’t mean you need to show your partner your account balances; it could be as simple as agreeing to talk or exchange emails quarterly on how well you’ve been keeping to your plan. Your partner could be a friend or family member, a financial advisor or a trusted colleague.
Remember that little savings add up
Yogi Berra also said, “a nickel ain’t worth a dime anymore.” They say be small change, but nickels and dimes, quarters and dollars, add up. If you can’t kick the fancy coffee habit completely, try buying a medium cup instead of a large. Do you really need to subscribe to HBO, Starz and Showtime? Lowering your credit card limits is another way to rein in your spending. Or shop around for a card that has lower rates. What you don’t pay in interest, you can put in your retirement savings account.
There are more tips like these, and a wealth of information about using self-directed accounts to save for your retirement in The Entrust Group’s Learning Center.