Planning for one’s retirement is never easy because it so often feels like it’s part of a distant future, utterly and totally removed from the present and one’s daily life. However, if one thing in life is inevitable it's the passage of time, and the longer one plans a retirement and saves up for it, the more rewarding it will be. The only challenge in retirement planning (aside from actually saving up the money) is knowing how best to go about it. Although there is no absolute right or wrong and one size definitely does not fit all, here are a few tips worth keeping in mind.
Pay yourself first.
You’re probably heard this phrase before where retirement planning is concerned. It’s so often repeated because it’s so often true. Whenever you get paid, before you pay your bills and spend your hard-earned money on something for yourself, “pay yourself” by putting aside as much as you can spare. Whether you can save 5 dollars a month or 500, putting something into your savings will result in another well-known phrase being proved true: little piles make big piles.
Sure, we'd all like to get our hands on that lucky lottery ticket, especially the really lucky ones that have pay-offs as high as the record-breaking $1bn in Powerful in 2016. However, with lottery odds being as high as 1 in 76,767,600 for the Australian Powerball for example, you can't really base your long-term plans on the possibility of winning such a game of chance. Regardless of how much you can invest in your retirement, make sure you stick to a schedule. Consistently adding to your retirement fund will make it more stable and grow quicker. A little at a time is key here.
Start as early as possible.
The inevitability of the future can be difficult to grasp if you’re young, but it is a truth. And another truth is that the longer the money earns interest the more of it you’ll have. Einstein allegedly called compound interest one of most powerful forces known to humankind. And he was right: It’s not how much you can save but how long you can save it that counts.
Never touch your retirement fund!
Regardless of what else happens in life keep your fingers off it until you’re ready to retire. Especially if you’re simply saving, the longer the money sits untouched the more you will have.
Decide on and stick to your strategy.
Retirement planning is all about the long term, so don’t change plans every couple of months. Compound interest might be working for you – in which case, let it do that. Keep putting money into the account and your savings will grow into a nice little nest egg. If you have the expertise and time to make business investments then say on top of them and let them mature. If there’s a right moment to sell, then seize it, but otherwise remember that the longer the investment sits the more yield it will return.
Planning for one’s retirement is never easy. There are numerous options and even contradictory advice to be had. Finding the right financial path to take that leads to a comfortable retirement will almost certainly not be the same for everyone. However, two behavioral factors that they all have in common are discipline and consistency.
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