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.
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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