A recent study found that more than half of Americans nearing retirement age have less than $10,000 saved and haven’t done retirement planning. However, there are still plenty of ways to retire comfortably without a million-dollar nest egg.
Do you want to learn how to retire in 10 years with no savings? If yes, continue reading, because today we are talking about:
- How to start saving for retirement;
- Step-by-step of each year in a 10-years plan;
- Cash-value life insurance as an option for achieving retirement goals and building wealth.
Keep reading if you are ready to learn how to start saving today and make your future bright!
Make Your Position Clear
Before we get into the details of saving for retirement, there are a couple of things you should do first. First, make sure you have a clear idea of your financial goals. Do you want to retire as soon as possible? Or do you want to retire with a particular lifestyle? Knowing your goals will help you create a plan to reach them.
Secondly, take a close look at your current finances. How much debt do you have? What are your income and monthly expenses?
Getting a clear picture of your finances will help you create a retirement savings plan that makes sense for your unique situation. You need to outline a retirement budget to have an idea of how much you have to cover each month in expenses. Having a realistic plan with a proper approach is a halfway done process.
Now that you have a better understanding of your goals and finances let’s look at some ways to start saving for retirement.
10-Year Journey: Step-by-Step
Here is an easy plan that anyone can follow to retire in 10 years.
First Year: Setting the Framework
Every start is complex, and starting retirement planning is not exceptive. You need to commit to this plan and realise that one decade is a pretty long period. Some unexpected situation will appear, your motivation may drop after some time, or your family won’t be supportive as you would like.
You are responsible for your future. Take the first day of this journey to set the tone for your financial journey. It won’t be easy, but always remember that you have the power to achieve your goals and that everything you do now will be worthy in the future. Consider writing that as a reminder when things get tough.
Months One Through Three
The crucial assignment for this stage is to cut down your expenses and other fees as much as possible. Any way that you can think of to reduce your spending can powerfully accelerate your retirement savings.
How would you do that? That depends on your lifestyle. But think about it as cooking at home for your friends and family instead of dining out. If your job doesn’t require an expensive cell phone plan, cut it down. Maybe you are spending too much money on a gym membership even though you have a cheaper gym in your neighborhood, which also suits your needs. Don’t be afraid to consider drastic moves; downsizing your home, switching to public transportation, or going to thrift stores can make an enormous difference in your budget.
Those were some of our ideas to help you think of reducing your expenses, but they are different for anyone. Remember: everything you do will have positive effects on your savings rate in the future.
Establish the tracking system that works for you. Many people get stuck even after cutting down their expenses because they don’t track how much and what they are spending. The systematization of your monthly budget, spending, debts, account balances, or anything related to your money will help you spot the problems quickly and view your situation. Pen and notebook will do the work, or you might want to try an app for your mobile or make an Excel table for that – whatever is convenient for you.
Months Five Through Twelve
Once you have a budget, you can set aside money for retirement funds. A good rule of thumb is to save 10% of your income for retirement. So, if you make $3,000 per month, you would save $300 per month for retirement.
If saving 10% of your income is not possible now, don’t worry. Start with what you can afford and increase your savings rate as your finances allow. The important thing is to get started!
In addition to saving money, you should also begin paying down any loan you have.
High-interest debt can quickly eat away at your savings like credit card debt. So, it’s crucial to get rid of this loan as soon as possible.
If you can’t afford to pay off your debt and save for retirement at the same time, prioritize paying off your debt. Getting a second job might help you achieve that, and once your debt is gone, you can put all of your focus on saving for retirement.
Year Two: Increase Income
In the second year of your 10-years away from retirement, you should continue to do what you did in the first year. Keep saving 10% of your income and paying down any debt you have.
If you haven’t already, now is also an excellent time to start investing for retirement. There are a couple of different ways to do this.
401 (k) and 403 (b)
Suppose your employer offers retirement accounts, like a 401(k) or 403(b), and start contributing to it. Many employers provide matching contributions, which means they will match a certain percentage of your contributions. For example, if your employer offers a 50% match on 401(k) contributions up to 6% of your salary, they will contribute 50 cents for every dollar you contribute, up to 6% of your salary.
Traditional and Roth IRAs
If your employer does not offer a retirement savings plan, or you want to supplement the one they offer, you can open an individual retirement account (IRA). There are two main types of IRAs – traditional and Roth.
With a traditional IRA, you contribute pre-tax dollars, which means your contributions are tax-deductible. The money then grows tax-deferred, meaning you won’t pay taxes on the growth until you withdraw it in retirement.
You contribute after-tax dollars with a Roth IRA, which means your contributions are not tax-deductible. But the money grows tax-free, which means you won’t pay taxes on the growth when you withdraw it in retirement.
Both traditional and Roth IRAs have their own set of rules and regulations. So, it’s essential to do your research before opening an account. Once you’ve decided which type of IRA is right for you, open an account with a reputable investment firm and regularly contribute to it.
Side note: Check out can you qualify for Social Security benefits. For most workers, Social Security is additional income besides savings. Monthly income will depend on your career earnings, length of work history, and the age at which benefits are taken. The Social Security Administration has an online tool where you can estimate how much money you will have each month if you get qualified. If you are over 50 years old, you can also take advantage of catch-up contributions which allow you to put in an extra $1,000 into an IRA or Roth IRA and $6,500 extra in your 401 (k).
Other Investment Accounts
Don’t be afraid of starting investing in non-retirement accounts because it is the best way to make more income. A standard brokerage account is usually an option for people to start investing because it provides access to a broad range of investments, including mutual funds, stocks, ETFs, and more. Depending on your annual income, goals, and the timeframe you want to achieve those goals, consulting financial advisors can improve your knowledge about managing money and assessing your risk tolerance.
Year Three: Continue to Learn
After the first two years, you should be caught up with the basics, but there are still left of the journey. Besides the same thing you did during the first two years, you should still learn and seek information because you can always find new ways to save, invest, and take more money home. We have plenty of ways to keep learning: money-related books, podcasts, and blogs.
Year Four: Control Your Spending
After saving money and improving their income, many people give in, so they start spending too much and become broke again. It’s important to keep tracking and reviewing your spending, never to go back to the situation of no savings. Also, always have in mind that often finding new ways to make more money is as essential as having your spending under control. Many people find a part-time job or start a side hustle.
Year Five Through Ten: Stay the Course
Compare the financial journey to losing weight – they both require commitment and discipline, and both can collapse if you break the routine. If you have followed this retirement plan for five years, you most likely have developed your system, and you are on a good path to financial security. Having good financial habits and knowledge is for a lifetime, not just for achieving some financial goals. Even when you accomplish your retirement plans, there is no reason to stop having control over your finances.
How Much Is Enough Money for Retirement?
It’s hard to tell the precise amount you’ll need for a comfortable retirement because it depends on your living expenses and retirement income. Many people follow the ”4% rule”. The rule of thumb suggests you expect your investments to make roughly 4% per year. You will be able to withdraw 4% of your account per year. If that is the case, you need to have savings of one year’s worth of expenses equal to 4% of your retirement portfolio.
Remember always to calculate health care expenses that may be higher later in life, the vast compounded effect of investment return and inflation over the long period, and any high costs for the future (such as buying a new car). Your golden years will be much more peaceful if you cover all the possible situations in the future.
Use This Plan in the Most Efficient Way
This retirement plan is acceptable for the basic idea of savings and investing in your retirement accounts, but there are many ways you can apply to this plan. The good thing is that you don’t have to be a certified financial planner or specialized financial advisor to follow this plan. But the enormous disadvantage of this plan is that it can’t lead you to financial independence.
We will introduce you to the Cash-value life insurance that we think is the most suitable for this plan. Due to countless possibilities of this approach, you will be able not just to retire but to build wealth, achieve financial independence, and enjoy benefits during life.
If it sounds dreamlike, keep reading to see how it is achievable!
The Infinite Banking Concept
Infinite Banking Concept, cash-value life insurance, or overfunded life insurance is, without competition, the best way to achieve financial independence and retire in 10 years, even with no savings at the moment. Cash-value life insurance can be used as a retirement plan that allows you to use your life insurance policy like your own personal bank. You can make deposits into your policy and then take loans out against those deposits when you need them. This concept provides many benefits, including tax-free growth of your money and the flexibility to access your cash when you need it.
To get started with the Cash-value life insurance, you will need to purchase a Whole life insurance policy. This type of policy has two main components: the death benefit and the cash value account. The death benefit is the amount of money your beneficiaries will receive if they file a claim on your policy after you die. The cash value account is like a savings account that grows over time and that you can access through loans.
One of the main advantages of the Cash-value life insurance is that your money grows tax-deferred. This means that you will not have to pay taxes on the growth of your cash-value account as long as the money remains in the policy. Another advantage is that you can take out loans against your policy’s cash value without having to pay any taxes on the loan amount. The interest rate on these loans is typically lower than the interest rates charged by banks and other lending institutions.
One of the best things about the Infinite Banking Concept is that it gives you complete control over your personal finance. You decide how much money you want to contribute to your policy each year, and you also choose when and how to use the money in your cash-value account. This type of policy is not subject to the ups and downs of the stock market, so you can rest assured that your money will be there when you need it.
One of the main reasons we think this investment strategy is for (almost) everyone is because you can follow it whatever your situation and goals are. With the Infinite Banking Concept, you can retire in 10 years whether you are over 50 years old and have no savings for retirement or you started saving in your 20s and want early retirement. Or, if your current goal is to gain wealth, you can use Over-funded life insurance as an investment vehicle that doesn’t require risk tolerance.
We hope that after reading this, the following points have come into focus:
- It is possible to retire in 10 years even if you don’t have savings today;
- You can manage the lifestyle you want whatever your age is;
- Cash-value life insurance is the ideal approach for achieving all of your goals.
Here in Wealth Nation, we teach people how to manage personal finance, make, use, and multiply the money without banks, just using Whole Life insurance. Consider signing up for Wealth Nation and learn how to achieve financial independence. We hope to see you around!