How the Middle Class Can Budget for a Comfortable Retirement
The middle class is in a good position to prepare financially for retirement — if you are strategic. The best way to prepare for a comfortable retirement is to start planning and taking steps as early as possible.
Read More: 6 Ways To Build Wealth in Your 60
Check Out: 12 Key Ways the Rich Multiply Their Wealth
However, even if you’re starting later than you’d like, by utilizing a budget and other planning tips, you can still get there. Here, experts explain how the middle class can budget for a comfortable retirement.
Monitor Your Expenditures
You can’t save in earnest for retirement until you figure out where your money is going, according to Michael Hammelburger, CEO and financial expert with The Bottom Line Group.
“Make sure to keep thorough track of all of your monthly expenses, including spending on both necessities and extras,” he said. “This will highlight areas in which you might be able to save money.”
Trending Now: Ramit Sethi: 5 Easy Steps To Getting Rich in 2024
Determine and Reduce Expenses
Once you’ve budgeted and started putting money toward retirement, you’ll need to figure out expenses you can cut back on.
“[This] could involve cutting back on eating out, looking for more affordable entertainment options, or reviewing subscription services. Over time, small changes can add up to a lot,” said Hammelburger.
Prioritize Retirement Contributions
Though there are several things to save for, Hammelburger recommends you prioritize retirement contributions, treating them as a fixed expense.
“Set aside a specific percentage of your income for retirement savings, treating it like a monthly expense. Consistency is ensured by setting up automatic transfers to your retirement account.”
Treat Budgeting as a Strategic Approach
Budgeting is more than just an expense tracking tool; it’s a strategic approach to making informed decisions about money allocation, according to Khwan Hathai, certified financial planner and certified financial therapist at Epiphany Financial Therapy.
“Budgeting helps you understand where your money goes, enabling you to identify opportunities for savings without compromising your current lifestyle,” Hathai said. “It’s about finding a balance between current needs and future aspirations.”
Consider Zero-Based Budgeting
The zero-based budgeting approach involves assigning every dollar a specific role, be it for bills, savings or leisure.
“It ensures that you’re actively involved in deciding how your income is utilized, which is critical for long-term savings,” Hathai explained.
Once you’ve done so, it’s vital to prioritize retirement savings. “This might include contributions to a 401(k) plan, especially if there’s employer matching, or setting up an IRA account if such a plan isn’t available,” she said.
Automate Retirement Savings
“Automation takes the hesitation and temptation to spend out of the equation,” said Hathai.
By setting up automatic transfers to a retirement account on payday, retirement savings become a fixed part of your financial plan.
Utilize Your Workplace Retirement Plan
Many employers offer a retirement plan and some will even match funds, according to Chelsie Moore, CFP(r), CFA(r), director of Wealth Management Solutions at COUNTRY Financial.
“Many hard workers made the smart decision early on to set, or even increase, their retirement contributions in their workplace retirement plans,” said Moore.
Moore explained that though the markets have been rocky at times this year, we’ve still seen a great rise overall.
“Investors who stuck to their plan through the ups and downs this year have been rewarded. After a couple of years of heightened inflation, decreasing inflation provides for greater excess cash flow.”
Put Raises Toward Your Goals
While raises may feel like extra money, Moore warned that it’s better not to treat them that way and instead put them toward your retirement goals.
“Many people chose to direct an additional portion of their raises, when they get them, to their employer-sponsored retirement plan,” Moore explained. “That’s good behavior and one that more people probably felt they could follow through with this year since inflation has been a little more manageable.”
Taper Back Your Retirement Scenario
According to David Bakke, financial expert at DollarSanity, you should try to think realistically about your retirement plan, as well.
“Unless you envision unlimited worldwide travel in your retirement or any other extravagant retirement expenses, it should be a lot simpler to budget for retirement,” Bakke said. “Research those costs as best you can and you’ll probably find that you don’t need as much money as some experts think you do.”
Continue To Save Through Retirement
Just because you retire does not mean it’s time to spend all your hard-earned and invested funds quickly. Bakke explained that his 92-year-old mother still clips grocery coupons, physical and digital.
“She saves money on energy through basic tips, and she’s rather frugal when it comes to every day. Always looking for a discount. If you do the same, your retirement could be enjoyable with much less effort,” he said.
A comfortable retirement is an ongoing process, not something you just plan for and then hope it works out. Careful budgeting and other smart financial strategies will keep you comfortable in your golden years.
More From GOBankingRates
This article originally appeared on GOBankingRates.com: How the Middle Class Can Budget for a Comfortable Retirement
