Retirement….even saying the word during our current economic “cycle” invokes a sense of worry and trepidation from many nearing that age. Without a systematic plan, even financially vigilant retirees run the risk of being unable to live at their preferred comfort level. Developing a smart and realistic retirement strategy is essential in giving you the best chance to achieve your post-career goals.
Here are ten straightforward, yet critical, tips for those preparing to enter this next stage in life:
- Pick-A-Date – Retirement planning works better when you are thinking precisely, so pick a date that you believe would be an ideal time to retire. It would be preferable to calculate this conservatively by choosing an earlier-than-expected date, giving you some leeway when it comes to the actual retirement.
- Start Saving – This is somewhat obvious, but many do not consider how important it is to start early when it comes to retirement savings. All that noise you hear about compound interest is completely true, and saving early will make a HUGE difference on your bottom-line.
- Understand YOUR Situation – Every retiree has different needs, and you are not an exception. Experts estimate that you will need around 70% of your pre-retirement income – lower earners, 90% or more – to maintain your standard of living when you finish working.
- Reduce Debt – The last thing you want to do in retirement is deal with extra interest payments, so try and reduce credit card or loan obligations. Retirement is a new start, so try not to be saddled by past debt.
- Contribute to your Company Savings Plan – This is usually in the form of 401k’s, where your company may match your own contribution, up to a certain percentage. Some employers tend to be quite generous, so if you work for someone offering a 6% match, go ahead and match that full amount. This is basically free money.
- Invest in your IRA – Compound interest is a powerful weapon when looking long-term, especially when it comes with a tax-friendly structure. The earlier you invest in your IRA, the larger your war chest will be when you retire. A little love goes a long way in this sense.
- Diversify – As a retiree, you are not looking for the silver-bullet investment to go all in with. Spreading your resources out into multiple asset classes will give you peace of mind knowing your money is not clumped altogether, increasing risk. Find investment vehicles that guarantee income for life and are not subject to the day-to-day fluctuations of financial markets.
- Consider Social Security/Insurance Coverage – Know exactly what you will be getting from the government and plan accordingly. Do not rely on these payments, but learn about the system so you can maximize benefits. With insurance, adequate coverage is paramount in retirement, so make sure you have proper life, health, homeowners and auto coverage.
- Think Positive – Although this is not much of a strategy, staying upbeat and confident while preparing for retirement will give you the ability to make rational and non-emotional decisions involving your finances.
- Seek Advice – Aligning yourself with someone who has your best interest in mind will only make your retirement situation better. A professional money manager has the resources to put you in the best situation possible, while you can sit back and relax. Advisory companies, such as Karlan Tucker & Associates, specialize in retirement, so developing a relationship with them could make all the difference.
Taking a pragmatic approach will give you the advantage when it comes to retirement, so cover all your bases and plan with a long-term, conservative, and measured outlook.