Are you financially ready for your retirement? You want to be ready, don’t you? Or do you want to be one of those individuals who have to keep working when they retire?
Since we are living longer now a days, retirement for most of us will be one of the longest periods of our life. For some of us, our retirement years could be over 20 years. With that in mind, you may need almost as much money during your retirement years as you do during your working years.
If you use the process of investing, you will be ready for retirement. 401k investing is a combination of many puzzle pieces; individually the pieces are not as powerful as they are combined.
Dollar cost averaging, asset allocation, account diversification, 401k retirement account maxing, 401k retirement plan matching and IRA investing all work together like a puzzle. These individual puzzle pieces when put together create a beautiful picture for you called your retirement. Let’s get you ready.
Getting You Ready For Retirement
You earned millions!! Where did it all go?
- Giving you some reality.
- Over your working lifetime you will have earned millions of dollars.
- You may need that much for 20 + years of retirement life.
- From your very first job – projected out until you retire – it’s safe to say that you will have earned millions of dollars.
- You did not keep it all – so where did it go?
- Your earnings went to pay for taxes, inflation, living expenses, insurances, savings and investments.
- Be realistic.
- Your monetary needs will change only slightly when you retire.
- In retirement you will still need money for taxes, inflation, insurances and living expenses.
- When you retire, expenses do not just go away.
- In retirement sometimes expenses increase.
- You may need to pay for health care, health insurance, travel expenses or other fun expenses that you didn’t have to pay for before.
- Your retirement investments will have to pay for all of those expenses.
- Start saving for your retirement, now!!
You can’t get it back, moving forward.
- It’s gone.
- The money you have earned and spent over your life time – – is gone.
- But there’s hope.
- Start managing the money you do keep like a pro.
- How you manage the money you do get to keep is crucial to getting you ready for retirement.
- Money management is done best under a process.
- Money professionals and wealthy individuals all use a process to accumulate wealth, so should you.
Use The Process of Investing: It Works.
Dollar Cost Averaging – buys your investments on sale.
- By dollar cost averaging you are investing the same dollar amount on a regular basis regardless of market conditions.
- This process buys some investments at a high price and some at a low price.
- The highs & lows are averaged together – your money is well spent.
- The pro’s dollar cost average.
- Dollar cost average regardless of what you hear about the market and the economy.
- When the market is down, you are actually buying your investments on sale….so getting more for your money.
Proper Asset Allocation – lowers the impact of market dips.
- Asset allocation is the percentage split between the different investment styles within your investment accounts.
- Aggressive, moderate and conservative are the different investment styles.
- These investment styles are called asset classes.
- 401k accounts are usually invested in mutual funds.
- Cash or a cash equivalent are conservative.
- Bonds are conservative.
- Balanced funds are moderate.
- Large cap funds are moderate.
- Mid cap and small cap are aggressive.
- And international funds are definitely aggressive.
- Spreading your 401k contributions among the different asset classes will lower the impact to your account balances when the market drops.
Good Diversification – helps lessen the effect of market swings.
- If you spread your investments between cash or a cash equivalent, bonds and stock investments, you will have a diversified portfolio.
- Staying diversified will help smooth out the upward and downward swings the market puts your investments through.
- Market swings can cause your investment returns to fluctuate.
Maxing Out – gets you tax benefits.
- To take advantage of the tax benefits, max out your 401k contributions every year.
- Your taxable income drops.
- You keep more of your money in your pocket.
- More money in your pocket gets you ready for retirement at a faster pace.
- You are accumulating money for retirement that doesn’t get taxed until you withdraw it.
- When you do withdraw it, you should be in a lower tax bracket, so taxes will be less.
Employer Matching – gets you FREE MONEY!!
- If your employer offers to match your 401k contributions…FREE MONEY!!
- With an employer match, your employer is handing you free money.
- You cannot turn down free money.
Individual Retirement Account’s – other retirement options
- IRA’s can be a supplement to your 401k investments.
- An IRA can be used as a retirement investment if your employer does not offer a 401k retirement plan.
- Your contributions can be tax-deductible.
- Your earnings on the account balance can be tax deferred.
How you manage your money throughout your lifetime will determine what kind of retirement you will have. Getting ready for retirement is not about what you make but what you keep.
Good money management means keeping more of your money in your pocket. With more money in your pocket, you will accumulate wealth quicker; and be ready for retirement with relative ease.
Getting ready for retirement can sometimes be a bumpy ride. Things get in the way of accumulating your wealth; job changes, unexpected expenses; unplanned for situations. If you follow the process of investing that we discussed, you should be able to smooth out the bumpy ride.