When people think about retirement, they usually imagine easing into a more relaxed lifestyle and having more time for loved ones, travel, and the hobbies they’ve been wanting to take up. What many forget, however, is that to be able to live comfortably – and have fun – come retirement, you’ll need to have enough money to fund it all.
Thing is; financial security doesn’t happen overnight. It takes discipline, commitment, and a lot of financial planning.
You may think it’s too early to worry about retirement in your 20’s or 30’s, but time moves quicker than you think. If you don’t start weighing different retirement options and preparing for the future now, you may not have enough time later.
Don’t let retirement sneak up on you. These tips will help you ensure retirement success.
1. Set Your Retirement Goals
However far off in the future it may seem, it’s never too early to begin planning your retirement. Ask yourself: what kind of life do I want when I retire? Where do I want to retire? How do I want to spend my free time? Are there places I want to visit?
Some of your retirement plans may change or evolve over time, but setting your goals as early as now will give you a rough idea of the level of financial security that you need to achieve.
2. Know Your Retirement Needs
Experts estimate that retirees will need about 70-90 percent of their pre-retirement income to maintain their standard of living. However, this largely depends on your lifestyle choice by the time you retire. If you want to travel more, then your projected expenses could be higher than what they are now.
Retirement is expensive. And being forced to pinch pennies in your golden years is the last thing you’d want. Having realistic expectations about your post-retirement spending will help you determine and build a sufficient retirement portfolio.
3. Start Saving While You’re Young
If you haven’t started saving for retirement yet, start now. Your money will have more time to grow if you start saving sooner rather than later. Ideally, you should start saving at least 10 percent of your gross income, but you can start with a lower amount.
Time has a huge impact on the amount of money you’ll be able to save. Consistently allocating a small portion of your salary towards your retirement fund can significantly impact the value of your savings in the long term, thanks to the power of compounding interest.
4. Maximize Your Employment Benefits
Take advantage of any employer-sponsored retirement savings plans, such as 401(k)s. Moreover, aim to put enough into your 401(k) to be eligible for the maximum matching contribution your company’s willing to make.
Maximizing your contribution will not only lower your taxes; the combination of compound interest and tax deferrals will significantly increase the amount you save over time.
5. Invest Your Money Wisely
You have a lot of options when it comes to investing your money. There’s stocks, bonds, mutual funds, ETFs, and even real estate. But more important than where to invest is understanding how your money is invested.
Your portfolio allocation should take into account both your risk tolerance and your return expectations. Whether you’re investing the money yourself or you have a professional wealth manager in charge of your investment decisions, it’s important that you’re comfortable with the risks taken in your portfolio.
6. Keep Your Retirement Fund Intact
Resist the urge to access your retirement money to fund short-term goals or significant life events. If you take all or a portion of it now, you risk losing both the principal and the interest, plus any possible tax benefits.
Even if you change jobs, consider keeping your savings invested in your old plan or transferring them to an IRA account. The longer you keep your money invested, the more funds you’ll have for future goals.
About the Author:
Rachael Harper is the Content Marketing Strategist of Bennett & Porter, a wealth management and insurance firm based in Scottsdale, Arizona. When not writing, she makes use of her time reading books and playing bowling with her family and friends.