In the latest “Retirement Confidence Survey” by the Employee Benefit Research Institute, half of workers admitted to having little or no confidence in their ability to retire comfortably.
This is a trend that seems to persist even as Americans have begun to recover from the Great Recession. To help break the cycle, we thought we’d share these 5 key principles of money management recommended by AARP The Magazine to ensure a healthy retirement fund:
1: Live not just within your means, but consistently below your means throughout your working years
2: Retire your debt before you retire. With the average American estimated to spend more than $US600,000 on interest in their life, cheapskates accrue huge savings by avoiding debt and banking what they would otherwise pay in interest. When it comes to retirement, cheapskates believe that — almost by definition — you’re not ready to retire until you’ve retired any personal debt, including paying off your home mortgage.
3: Never underestimate the power of saving. Ben Franklin famously said, “A penny saved is a penny earned.” But when you think about it, a saved penny is actually worth more than an earned penny (once you factor in the taxes paid on most earned pennies, the costs typically incurred in earning that penny and the fact that a saved penny can be invested). Cheapskates understand this and place a priority on savings.
4: Never plan to rely on Social Security income alone in retirement. Social Security was never intended to be the sole source of income for retirees
5: Simple-sizing your life not only saves you money but reduces stress and makes you happier. Whenever possible, choosing the least complicated option — from a computer with fewer bells and whistles, to living close enough to where you work so that you can walk or take public transportation — tends to cost the least and allows us to focus on the things that are truly important in life, often those things that come without a price tag.