How to Put Retirement Savings on Autopilot

How to Put Retirement Savings on Autopilot

A good retirement savings plan should be tailored to your needs, assessing your cash flow, liquidity, time horizon, and risk tolerance. It’s important to limit risk when possible, including discipline risk, or the risk of spending, as opposed to saving, the money left over after the bills are paid. Automated savings plans can help eliminate that risk.

Studies have shown that most Americans don’t save enough for retirement – and almost half have nothing put away. Many Americans spend all they have, only to hope something is left over to invest for retirement.

Saving vs. Spending
Automated savings plans can assist in meeting your goals despite all of life’s distractions. First, determine how much money needs to go to necessary expenses, and how much you can invest each month. Then, have that amount deducted directly from your checking account, and the remaining money is for discretionary use.

Having the money automatically removed from your account will prevent you from the temptation to spend it on something else. You are free to spend the amount left without worrying about savings.

Healthy Habits
Automated plans are the easiest way to establish healthy habits for retirement savings, and they are efficient and effective. If it’s difficult to save large amounts immediately, start off small. Over time, push yourself to increase the amount that’s automatically deducted.

Lots of the advice you may see will tell you to make small changes, like making coffee before leaving home instead of buying it out. But, small changes yield small results. By maximizing what you can afford to do, you will more easily meet your goals.

Remember, these automated plans aren’t set in stone. You can still change it, ideally by increasing it. By extrapolating your savings from monthly amounts to yearly, you can see just how effective your plan can be.

It may not be the easiest decision of your life, but pushing yourself to have more discipline in your savings plan will earn you all sorts of gratitude from your future self. Discuss a plan that works for you with a knowledgeable advisor.

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