How to Save Early for Retirement

Social Security is not meant to be your sole source of income in retirement. You'll need more money to augment it, no matter how long you've worked. The earlier you start to save, the more likely you'll be able to achieve your retirement dreams. And you can find the money to save for retirement by making a few simple lifestyle changes.

Instructions

1. Determine how much you would like to have for retirement. When you have a goal in mind, it's easier to stay on course. And when you start early, you get the advantage of compound interest. That means your money is actually working for you. When you're young, it's smart to invest about 15% of your total income every year.

2. Start right out of college, or earlier. If you invest early, and then stop for a while, odds are that you'll still be better off than someone who waited until later in life to save for retirement.

3. Cut back on your current expenses. You can save hundreds of dollars every month just by making simple changes to your budget. For example, make your own coffee instead of stopping in the local coffee shop. When you find several areas you can cut, you can pour that money into your retirement account.

4. Enroll in your company's 401(K). You can sign up to have money taken directly out of your pay check. And you should take advantage of your company's matching program to maximize your savings.

5. Look into stocks. Large company stocks have had a good rate of return over the years. In fact, it's been more than 10% since the 1920's. If you invest in a reputable company, you can leave your money there for a long period and then you'll enjoy significant returns on your investment.

6. Erect a safety net. No matter how good a stock looks, all stocks carry risk. Dedicate a savings plan for retirement that resembles a four-legged chair. Put 25% of the allocated funds into blue-chip stocks, 25% into Triple-A rated bonds, 25% into Treasury Notes and 25% into CD's. Even safter than investing in individual stocks would be to put the 25% in a blue-chip mutual fund. At the end of each year, if you have extra capital for investment, you can put that in higher risk products.