Remember the story of the grasshopper and the ant?
In times of plenty, the grasshopper played and played, while the ant stashed and stored for the hard winter ahead.
When it comes to retirement, you should be thinking like an ant, not a grasshopper.
In 2018, long-stagnant wages are finally on the rise, according to the Bureau of Labor Statistics.
Earnings are up more than 83 cents an hour year-over-year, the largest such increase since 2009.
The human – and grasshopper – response to extra money in a paycheck is an accompanying increase in personal spending.
Instead, experts recommend small sacrifices today to set up a better tomorrow. While everyone has at least some degree of control over income, they have a great deal of control over spending. Top areas of compromise are:
- Driving older vehicles
- Taking fewer and less extravagant vacations
- Putting in extra hours.
Will that do it? Probably not, but it’s a step in the right direction. Plan out in advance how you’ll spend your paycheck, creating a plan for short-term and longer-term spending goals.
Consider putting your 401K contribution on auto-pilot with an automatic escalation, bumping up your contribution rate by a percentage point or two each year, a subtle boost you’ll probably never notice.
Experts say you should have at least three to six months’ worth of living expenses saved in an emergency fund PLUS the equivalent of six times your annual salary saved by your 50th birthday.
If you’re years or decades away from middle age, it’s okay if you aren’t able to contribute a full 15 percent.
However, if you’re nearing or over 50, you may want to think about increasing your contributions.
Consider putting any “windfalls,” such as pay increases, bonuses or cash gifts from family members, directly into savings.
You might also want to consider delaying retirement by a few years in order to pad your savings, especially if you’ve taken time off to focus on other financial goals, such as buying a house.
Remember to prioritize your own future. Don’t sacrifice retirement savings to pay off student loans or cover your children’s education.