Featured Resources: Financial Education and Social Security
It is important to know about the benefits of the Social Security program. To get a better sense of what Social Security is and how it can help you, view SSA’s video “Social Security 101: What's in it for Me?” The video provides helpful information about Social Security, including tips on saving and planning for your financial future.
Your financial security in retirement will come from some combination of pensions, savings, and Social Security. Social Security was always intended to be a supplement to your retirement income and it is up to you to fund the rest of your own retirement. Although it may be difficult to save, keep in mind that even saving a small amount weekly or monthly can add up significantly over time.
The Power of Compound Interest
With the help of compound interest, you will be able to accelerate the income potential of your savings. Compound interest is a key aspect of saving, whether you are saving through a retirement account or a savings account at your bank. When you save money in an interest bearing account of any kind, you earn interest on the money you save. The term “compound interest” refers to the fact that you earn interest on the interest from the original investment. As illustrated in the chart below, if you save $10 dollars a week—assuming a 5% annual return for illustration purposes—you will have around $60,000 after 40 years.
It literally pays to understand the value of saving and using compound interest to your advantage. If you are able to save more aggressivly and put away $50 a week, then you will have around $300,000 after 40 years, assuming a 5% annual return. It is amazing what a difference increasing your savings rate can make to your overall account balance when you consider the effects of compounding interest.
You can use your own numbers to see the value of compounding interest with this Compound Interest Calculator. (Hint for using the calculator: “your current principle” means the amount of money you have already saved. For our example, we assumed a current principle of $0 and that interest was compounded 12 times per year.)
Automate Your Savings
Automating your money takes the emotional aspect out of forcing yourself to save—think of it as paying yourself first. You may be able to automate deposits into your bank saving account or brokerage account directly from your paycheck or checking account each month. It only takes a few minutes to set up, and the benefits add up tremendously over time.
You can automate your finances online, or by calling or walking into your bank or brokerage firm. Automating your finances is one of the easiest ways to save. Learn more about Automating Your Savings
Ways to Begin Saving
There are many ways to begin saving. One way to do this is through your job. Your employer may offer a retirement plan, many employers will offer a company match, which means that they will match your contributions up to a certain percentage. In order to maximize your savings, contribute as much as you can afford to the plan, paying special attention to the match your employer offers.
If your employer does not offer you a retirement plan option, check with a bank or other financial institution for ways to save or invest on your own. Check out CNN Money’s Ultimate Guide to Retirement for more information on employer sponsored and individual retirement plans.
To find more helpful information about retirement, financial education, and saving check out the following websites and hotline: