There’s a reason workers are advised to set aside money for retirement during their careers. If you don’t build savings, you may be forced to live solely or mostly on Social Security income. And that’s a pretty scary prospect.
Social Security will replace about 40% of your pre-retirement income if you’re an average earner. If you make $80,000 a year, it means you can expect around $32,000 a year once you start drawing Social Security. And chances are, that’s not enough to live on — especially when you consider that healthcare costs tend to soar in retirement.
As such, it’s really important to consistently set money aside in a dedicated retirement savings plan, like an IRA. The great thing about IRAs is that they’re not tied to employers. So if you work for a company that doesn’t have a retirement plan, or if you work for yourself, you can still set money aside for your future.
Of course, coming up with the money to fund your IRA can be a challenge. But if you’re hoping to boost your IRA balance, financial expert Suze Orman has a great approach worth following.
Think small for big results
You may have the goal of retiring with a certain amount of money in savings — say, $500,000. At first, that might seem like too daunting a number to wrap your head around. But Orman insists you don’t have to focus on that big number. Rather, think small and break down your savings goals on a daily, weekly, or monthly basis.
For example, rather than stress about how much money you’ll put into your IRA in your lifetime, or even in the course of a year, Orman says you can try aiming for a certain amount of money each week — say, $50, $80, or whatever it is you can swing. You can even try telling yourself you’ll put $10 a day into your IRA if that’s an easier target to manage.
If you stick to those smaller numbers, you’re less likely to get overwhelmed. And if you let yourself get overwhelmed, you might throw in the towel and give up on building a nest egg altogether, thereby putting yourself in a position where you end up struggling financially much later in life.
Take things slowly
You may realize that it will take a pretty sizable IRA balance to buy yourself a comfortable retirement. But remember, you don’t have to fund your IRA in five years. If you start working in your early 20s, you can spend the next 40+ years putting money into that account, thereby taking some of the pressure off to make massive contributions all at once.
Also, keep in mind that you can invest your IRA and grow your money into a larger sum. So even if you only end up putting $50,000 into your IRA in your lifetime, you might end up retiring with 10 times that amount thanks to savvy investing. That’s something you should take comfort in — especially if you’re only able to carve out small IRA contributions at this point in time.