Save Now, Retire Comfortably

By Meghan Northcutt, AFC ® Candidate, FINRA Military Spouse Fellow

According to a recent New York Times article, only 43 percent of workers under age 25 are contributing to employer sponsored retirement plans (such as 401k or TSP) with an average contribution of 4.3 percent of their income. The statistics grow to 62 percent of 25 to 34 year olds contributing an average of 5.5 percent of their income. While any savings is a good start, Wells Fargo Advisors recommend an incremented savings plan based on current age. Set your goal to save 10 percent in your twenties and thirties, 10 to 20 percent in your forties, and a minimum of 20 percent in your fifties.

Why should you start saving for retirement now? The amount you save compounds.  Compounding  allows you to earn money on what you've put into the retirement account along with the money that you’ve already earned. If you start by contributing $100 and have a 5 percent rate of return, you will have $105 after a year. During the second year, you earn 5 percent on the $100 you originally put into the account and on the $5 earned. The more years you save and the longer you leave the money in your retirement account, the bigger benefit you have to enjoy.

How can you save for retirement? CNBC recommends to pay yourself first  through automated deposits into an employer sponsored retirement plan Service members can take advantage of the Thrift Savings Plan (TSP) through a Traditional pre-tax or Roth post-tax contribution up to $17,500 per year. You can contribute up to $5,500 if under age 50 to an Individual Retirement Account (IRA). Traditional IRAs are pre-tax contributions while Roth IRAs are post-tax contributions. IRAs can be set up with banks, life insurance companies, mutual funds, or stockbrokers. It is important to research your options and choose the one best suited to your needs.

How much should you save to retire comfortably? Save as much as possible for your retirement. USA Today recommends multiplying your final year’s salary by 8. The calculation assumes you’ll need 85 percent of your final salary per year during retirement for 25 years. To get a more exact number for your personal needs, a little extra work is required. Choose to Save offers the Ballpark E$timate Calculator, which asks a range of questions to help calculate what your future needs will be versus your current financial picture. CNN Money offers the Retirement Needs Calculator and Retirement Planner Calculator. The Retirement Needs Calculator is a sliding scale system that gives a bar graph showing if your savings are currently on track for your retirement expectations while the Retirement Planner reviews your goals, income, savings, and portfolio.

By following the Military Saves motto “Set a goal. Make a plan. Save automatically,” you can retire comfortably. Take the Military Saves Pledge to make a commitment to yourself. Aren't you worth it? 

Tip of the Day

  • Written by Guest Blogger | September 30, 2014

    The Thrift Savings Plan (TSP) offers the same types of savings and tax benefits that many private corporations offer their employees under 401(k) plans. Sign up or get more info at

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