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imagesIf you are worried about being financially secure heading in retirement, you are not alone.  There are some alarming statistics that are not meant to scare you, but instead to motivate you to start saving at the very best time possible- TODAY.

Take for example the following:

75 percent of retirement aged Americans have less than $30,000 in savings.

1 in 6 older Americans live on less than 22,500.These are people you know.

Today we have five people working per one retiree, but by 2050, there will be less than three people working per retiree.This means less and less people supporting our social security system.

American 55 and older account for 20% of all bankruptcies, typically because of medical and funeral expenses.

1/3 of all Americans have absolutely zero confidence that they will be comfortable in retirement.

Many people ask themselves how they got into this predicament.  They wonder what they could have done different.  What could they have done to position them better financially in order to truly enjoy their retirement years after all their years of hard work?

There is really only one sound answer to this question- start saving early.  Put in a plan in action to start saving now.  Believe it or not, even starting a savings plan in your 20’s is not a bad place to start.  Yes, you are probably making your very own money for the very first time and want to enjoy spending it on the luxuries that this new found financial independence can buy you.  But you will be a lot happier down the road if you put some actionable steps into place starting as soon as possible- so you don’t have to worry later.

You may be thinking that it is a lot easier said than done to begin a savings plan.  It can be a bit intimidating.  For this reason, I like to break it down in steps.  If you can follow these five steps and complete them to the best of your ability, then when your retirement years come, you will be able to enjoy hobbies, friends, vacations, and all of the things that you should enjoy once those years are here.

5 steps to start saving today:

1. Start creating your emergency cash savings.

Your emergency cash should be used for one thing and one thing only- emergencies.  This is the money that you will need immediately in the event something financially life changing such as a job loss or catastrophic medical bill. I recommend that people have enough money in their emergency cash savings to pay for six months of your fixed investments.  The money in your emergency cash savings should be kept in a place where you can get it out immediately, such as a money market account.

2. If you now you have a large expense coming up in the next 12 to 18 months, like a down payment on a house or needing a new roof, set this aside in cash as well.

Don’t wipe out your emergency fund for a planned financial event.  If you know that you have a large expense coming up, this cash should be set aside in addition to the emergency cash fund.

3. Make the maximum contribution to your employer’s matching 401(k) program.

While not all companies offer a matching 401(k) program, those that do will usually match 50 percent of the first 6 percent of your income saved.  This is essentially free money to you.  Be sure to check with your employer to see if they offer this great benefit and take advantage of it if they do.

4. Start funding a Roth IRA. 

Contributions to a Roth IRA are made with after-tax dollars and can be withdrawn anytime without penalty.  Once you reach 59 and a half, all withdrawals are tax-free, and there is no mandatory distribution age.

5. After you have funded your Roth IRA, try to max out your 401(k).

In 2014, the maximum contribution was $17,500 (plus an additional catch up amount of $5,500 if you are age 50 or above).

Avoid being one of the alarming statistics and start saving today.  You will be much happier tomorrow if you do.

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