Saving for Retirement and Credit Repair

retirement-saving-credit-repairEveryone knows that it’s important to save for retirement, but it can be difficult to know where to start. Without concrete goals for retirement savings, it’s difficult to plan for the future.  This article will give you a few tips to help you get started.

Have an Emergency Fund

Before you even start your retirement account, make sure you have at least a six-month emergency fund saved. It should be large enough to sustain you if you suddenly find yourself without a source of income. Having an emergency fund in place will save you from needing to use expensive forms of debt – like credit cards – to pay for essentials in a financial emergency.

Save at Least 10% for Retirement

Every time you get paid, feed your retirement account by setting aside 10% of your paycheck. The earlier you begin, the better. Starting to save for retirement in your twenties will net you far more money when it’s time to stop working than if you start in your thirties, forties or fifties. Remember the earlier you start, the more compound interest can build.

The Percentage of Bonds in Your Portfolio Should Equal Your Age

This is a general rule of thumb, but the closer you get to your target retirement age, the more you should distribute your investment portfolio toward less volatile investments like bonds. Earlier in life, you can afford greater volatility, but you want to make sure your portfolio won’t take a big hit in the years leading up to your retirement should the stock market decline.

Expect to Get 7%-8% Growth from a Diversified Stock Portfolio

Nothing is guaranteed, but your diversified stock portfolio should average 7%-8% growth. A properly diversified portfolio will result in more long-term gains for your investments by limiting volatility.

Plan on Replacing 70% to 80% of Your Pre-retirement Income

Although you may need to replace more – especially if you or your spouse currently have or anticipate special medical needs – plan to need 70% to 80% of your pre-retirement income to live off of in your “golden years.”  Keep in mind, though, some studies suggest that you may actually need as little as 35% of your pre-retirement income after retirement.

Save Eight Times Your Final Income for Retirement

Some investment firms recommend a retirement planning model that encourages you to set goals by age. It suggests that you should have saved eight times your income at 65, if that is your goal retirement age. Other benchmarks are one times your income at age 35, three times by 45, and five times by 55.

Plan on Withdrawing 4% from Your Retirement Savings Every Year of Retirement

Most retirement plans are built around the assumption that you will withdraw around four percent of your savings per year of retirement. The goal is to earn 7-8%, spend 4%, and invest the remainder to keep pace with inflation.

Every Situation is Unique

These tips are not written in stone. Everyone’s situation is different, and you need to make decisions that are the best for you. If you are struggling with your credit score, credit repair should be part of your retirement plan. Consider Ovation for your credit repair needs to get yourself in a situation where you can afford to give your savings more attention.

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