Hey everyone! Today, I have a post from a blogging friend. Enjoy! This is not a sponsored post 🙂
Louis Mack is a seasoned retirement planner and self-proclaimed hippie. When he’s not giving advice on how to prepare for retirement, he enjoys spending his leisure time outdoors camping.
Saving for retirement is something that many people struggle with. This is because people view retirement as something that is far off in the distance and something they can “deal with later”. However, nothing could be further from the truth as the time to start considering retirement is the day you start working. By following some of these guidelines you can better prepare yourself for retirement and have the money you need when you actually retire.
Create a Retirement Plan
The first thing to do is create a plan for your retirement. The first step to doing this is to determine your retirement age.
There are a number of factors that will affect your retirement age and it is subject to change as economic factors you have no control over can impact when you retire, but it is possible to get rough estimate by using a retirement calculator which will take into account how much you are saving as well as other significant factors.
This will give an idea of where you need to get to and from there it is all about finding ways to reach that goal.
Start Saving…Now
This seems like common sense, but the importance of when you start saving cannot be understated. The earlier you start saving, the easier it will be to reach your retirement goals.
The reason starting early is so important is because it gives your money more time to grow. This is why it is important to contribute as much as you can early on, as this will pay off handsomely in the long run.
Utilize Retirement Plans
Another thing you can do to start saving properly for retirement is to utilize the retirement plans available to you. Typically employers offer retirement savings plans like an Individual Retirement Account (IRA) or 401(k) plan.
These plans can be very helpful for saving as they can be set up to automatically deduct from your paycheck which means you won’t even see the money you’re saving (making it difficult to spend).
The savings can be further increased with programs that involve “employer match” where your employer will match the amount of money you invest into your retirement savings. If this opportunity is available to you then you must take advantage of it as not doing so is simply throwing away free money.
Diversify your Investments
Diversification is crucial to any successful investment portfolio. By diversifying you can protect your overall investment against the risk of one particular investment category tanking.
For traditional IRAs, it is believed that a mix of higher-risk stocks combined with lower-risk bonds creates a well-diversified portfolio. Although it may depend on who you talk to, a general rule of thumb is to invest in a percentage of bonds that is equal to your current age (i.e. 30 years old = 30% bonds).
If you want to go a less traditional route you can invest in a self-directed IRA. These alternative types of IRAs offer many more investment options that range from real estate to precious metals. No matter what route you take, it is important to diversify and it is always a good idea to speak with a financial advisor before making any investment decisions.
Investing in your retirement can be difficult as there are certainly things you would rather spend your money on now. However, the only way to achieve your retirement goals is to save as much as you can and start as early as possible. If you remain diligent and follow some of the principles listed here, you will be much more successful at budgeting for your retirement and saving the money you need.
How are you preparing for retirement? When do you think you'll retire?
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Solid advice. Thinking about retirement early is essential for everyone, no matter what age. Then you can refine your investment portfolio to ensure your risk/reward profile matches your goals related to retirement.
I’m currently preparing my loading the employee pension scheme and investing in tax wrapped investment the best I can. I’m still young (its all relative!!), so my portfolio is on the risky side, but I still do have retirement in mind at this early stage.
Early early early! I agree with you, whatever your financial goals are, starting on them early is the best way to get there!
Our retirement will be on track due to an inheritance. Otherwise, we would be working for ever.
I’m saving by consistently putting money in my 401k each paycheck, owning a house and paying down the mortgage (to build equity), and finally getting rid of my student debt. I’m not sure when I will retire but hopefully will have a clearer picture in 10-20 years about when my target date is!
Definitely good advice to start planning as early as possible. I started saving right after college and it’s been a huge advantage. My wife and I don’t have a set retirement date yet, but we’d like to shoot for 50 or so.
All solid tips! We’re saving and appropriately diversified. Great tip on the planning – so many just throw money at something and hope it’ll work out for them.
Having a retirement plan will really help us in budgeting and saving our money. It keeps us open to other options to increase the money we will later spend during our retirement period.
The key is to save! Fortunately, I started fairly early (compared to others I know at least) Now I just have to keep it up.
I try my best to max out my ROTH IRA contribution each year. For the sake of ease, I invest a target retirement date fund and a total stock market index fund. So far, it’s helped me improve my net worth tremendously.
I always struggle with thoughts of paying off student loans early or sacking the extra money away so that it has time to grow. My student loans are at 6.125% so I don’t really think either option will matter in the long run by that much.
Time really is your best friend when it comes to saving for anything you want, especially your retirement. I agree with you that starting to save early will be very beneficial.
Luckily for me I have a pension, but I’m not relying solely on that. I started contributed to the retirement plan at work at my first job and opened an IRA. I continue to contribute into now. It definitely does pay to start early.
I’m so behind on retirement saving for my age but I’m finally at a point in my life where I’m not struggling to stay afloat. My commitment to myself starting in October is to get signed up for regular contributions to my Vanguard IRA.
Good list! I think the diversification is key… I am hopeful that I will be able to retire before the traditional retirement, making the diversification all the more important (since I may not be able to really tap my 401k or roth IRA right away. I think the biggest thing is just getting started, and then making consistent contributions, no matter how small. They add up!
Great post as always! Planning is key! If everyone only realize that starting early can make a huge difference there will be a lot of financially stable individuals walking around having fun.
One word: early!! If it’s too late for early: now!! 🙂
I started saving for my retirement at 22. I don’t have that much put away, but I’ll be able to meet the rule of having 1 year worth of income by the age of 30. I have a pension, too, with work. So that’s nice.
While I wholeheartedly agree that planning for retirement is desirable, there are also many things that can happen unexpectedly that interfere with those plans. Such things include divorce, loss of job, business collapse, health issues and so on. So to a great extent there is a need to be flexible and re-evaluate as things happen. In fact those unexpected things may provide opportunities or inspiration that you might not have otherwise had. Be prepared to seize the opportunities and follow the inspiration. I took early “retirement” after experiencing all the issues mentioned above, moved abroad and had a rich experience in financial survival mode ever since. Soon another episode will begin, moving to another continent for the second time in 14 years. Would I change anything? Absolutely not. Anyway, I never really did believe in retirement as such.
Starting to save is key. The sooner you can start, the quicker compound interest can begin to work it’s magic. When I started saving, I was only saving $10-$15/month. But every little bit adds up. Don’t ever think an amount is too small because it isn’t.
Hi Roy,
Thank you for your comment. While I understand that some of the above options may not be for everyone, I think there is a common strategy to follow when considering retirement. The key is to try and plan the best you can and set goals for yourself. This way even when situations arise (like the ones you mentioned) you can readjust your plan to reach your goals in a different way.
That first step of creating a retirement plan is the absolute key. It doesn’t matter how simple or extended the plan is. As long as you’ve got some general targets and are surpassing your goals to get there, then you’ll achieve them no problem. Definitely work the employer matching and max contributions to your full advantage!
This is a great reminder that retirement savings are so important. I have employer matching so that’s nice, but I’ve wanted to increase my individual portion for quite some time.
These guidelines might be ok for the boomers and WWII generations for whom retiring means no more paid work. But for X and millenials, we’re figuring on continuing to work for money-hopefully not as much.