What Is the Best Way to Save Money for Retirement?

Be honest with yourself, save according to your future goals, and you'll sustain an enjoyable retirement.

Some people expect Social Security and pensions to grant them a comfortable retirement, but this may be unrealistic depending on your goals. Before you determine your best options for saving, figure out how you expect to live in retirement. According to CNN Money, to live well in retirement, you'll need between 70 and 100 percent of your pre-retirement income. Aim for the higher end of this range if you have costly goals on the horizon such as travel, gift-giving and education, or more basic costs like debts or mortgage payments.

Start Early

Saving early invokes the power of compounding, meaning the amount you've saved grows each year. While there are many different methods for saving money, almost all of them will benefit substantially from an early start on your part. If you haven't started early, don't be discouraged -- saving later in life is far better than not saving at all.

Company Retirement Plans

Jump aboard your employer retirement plan as soon as possible and contribute as much as you can. Employers will often match your contributions by 50 percent or more, so you can imagine how quickly your savings would grow.

Personal Retirement Plans

Invest as much as you can, even if you're self-employed or your employer doesn't offer a retirement plan. Even those who are unemployed can contribute to an IRA if they're married to someone who is employed. A self-employed person has the option to start two kinds of retirement plans: an Simplified Employment Plan --- an SEP --- or a Savings Incentive Match Plan for Employees of Small Employers --- SIMPLE.

Stocks and Bonds

Stocks provide more growth over the years than any other type of savings. However, this isn't without a risk --- as demonstrated in recent years, you can lose money invested in stocks just as abruptly as you can earn it. CNN Money suggests people who are wary of stocks invest 70 percent in stocks and 30 percent in bonds, and to gradually switch the balance as you move into retirement years --- more in bonds than stocks.

Evaluate Your Lifestyle

If saving for retirement is difficult because you're struggling to pay bills, you should evaluate your lifestyle to be able to afford to put money into savings. MSN Money recommends critically evaluating your life and determining what you can do without. Among the suggestions: If you live in the city, sell your car. If you have closets full of things you never use, set up a massive yard sale. If movies, books and music are your primary sources of entertainment, check out the library.

References

• CNN Money: How should I invest?
• U.S. Department of Labor: Women and Retirement Savings
• MSN Money Central: 7 Radical Ways to Save Money