Baby boomers preparing to retire – many of whom lack the savings to do so – may want to review basic ways of “paying yourself first.” For many years, financial professionals have recommended that everyone increase their savings for retirement. And this is one of the best ways to do it.
The concept of paying yourself first makes sense: the idea is that your retirement comes first. Before paying your bills, set aside a portion of your income and move it to a savings account or retirement plan.
Automatic deductions
It’s especially easy if you arrange for money to be automatically deducted from your paycheck and moved into accounts set aside for emergency savings or retirement. Because you never “see” the money in your checking account, you won’t be tempted to spend it.
Maximize 401(k) contributions
You also can maximize contributions to your 401(k) plan. At first it may seem daunting to set aside 10% or 15% of your income. But look at it another way: Can’t you live on 85% or 90% of your income? Plus, that hit isn’t as big as it may seem: it’s coming from pretax money.
Shift gears
Finally, change your mind-set. Initially, it may seem as if you have less money at your disposal, so you’ll need to adapt your spending habits to match this somewhat lower income. However, after a while, it will feel less like a sacrifice – and you’ll have the peace of mind that comes from knowing you are preparing yourself and your loved ones for a comfortable lifestyle in retirement.